Cannasouth has entered into conditional agreements to take full ownership of its cultivation and manufacturing joint venture businesses, subject to a capital raise.
The company has agreed a deal with Aaron Craig to acquire his 50% stake in Cannasouth Cultivation and with Mark Balchin and Greenmeadows Health to acquire the remaining 40% shareholding in Hawkes Bay-based Midwest Pharmaceutics NZ.
Cannasouth Cultivation’s growing and processing facility, which will produce Good Agricultural and Collection Practices (GACP) and Good Manufacturing Practice (GMP) pharmaceutical compliant biomass, is now in the equipment installation and validation phase.
It is anticipated the new facility will have sufficient capacity to generate around NZ$8 million in revenue per annum, subject to securing commercial offtake agreements and completing quality certification.
Midwest Pharmaceutics NZ generates around $2 million in revenue annually, which will be consolidated into Cannasouth’s P&L from the date of acquisition.
Cannasouth chief executive Mark Lucas said: “There is strong global demand for premium pharmaceutical quality cannabis flower. The timing of the acquisition will bring all future revenues generated from the cultivation facility into the Cannasouth Group’s P&L. It also enables the company to control all aspects of the cultivation operation.
He added: “The Midwest acquisition provides Cannasouth with the opportunity to streamline operations and generate additional revenues, while positioning the business for GMP-certified medicinal cannabis manufacturing.”
Midwest CEO Mark Balchin will continue as chief manufacturing officer for the group.
The Midwest transaction is conditional on the parties obtaining approvals from several landlords and regulators to the change in control on or before August 31, while the Cannasouth Cultivation deal requires the company to complete a capital raising by September 30.