Ecofibre has agreed to sell its hemp food and animal products business Ananda Food to Elixinol Wellness for A$3 million.
A cash payment of $2m will be due on completion of the deal, expected in late March, while a $1m earnout will be subject to the value of cat litter product sales between April 1 2024 and June 30 2025.
Elixinol plans to raise $3.16m through a fully underwritten, non-renounceable entitlement offer to fund the acquisition as well as for marketing and general working capital. The deal is subject to completion of the raise.
Elixinol told the ASX the raise has received “strong support from new and existing institutional and sophisticated investors” adding it will also support the company on its pathway to EBITDA breakeven “expected to be achieved by mid-CY24”.
Group CEO and MD Ron Dufficy said the acquisition will “strengthen and broaden” the firm’s hemp ingredients portfolio making it “one of the largest suppliers of hemp ingredients in Australia across both branded and private-label products”.
He added: “It is complementary to our existing hemp product range and will bring improved unit economics through increased production yields and asset utilisation and create opportunities for significant cost and revenue synergies.”
Ecofibre said funds from the sale will be used to provide additional working capital for the group “as it continues to refine its focus on core businesses and reduce debt”.
Chair Vanessa Wallace added: “Ananda Food is currently too small to deliver near-term cash profits from its hemp food and pet products business. This sale will deliver a good outcome for Ecofibre’s shareholders and enable a sustainable future for the combined business.”