Elixinol Wellness has pulled out of a deal to buy German CBD company CannaCare Health after due diligence revealed the German market has become too competitive for the acquisition to be viable.
In March, Elixinol signed a binding agreement to acquire CannaCare for an upfront consideration of €3m in cash and €6m in Elixinol shares. A second earnout payment up to a maximum of €15m in Elixinol shares would have become payable in March 2022, based on CannaCare achieving revenue and profit targets.
However, this morning Elixinol told the ASX the deal, which was due to complete on July 5, 2021, was off.
The company said it had concluded that the acquisition, and the investment required to generate profitable returns, were not in the best interests of its shareholders.
It added: “Due to this changing German market outlook and strategic direction of both companies in the period since agreeing the proposed acquisition, the parties have together agreed to exercise their rights under the Share Purchase Agreement to mutually terminate the acquisition.”
CannaCare shareholders will cover a portion of Elixinol Wellness’ costs.
Global CEO Oliver Horn said: “CannaCare is a leading brand in the German retail market with a strong distribution footprint and is well positioned for growth. However, over recent months the German market has become increasingly competitive, and the additional investment required to achieve profitable growth exceeds our current risk appetite.
“The board has therefore taken the difficult decision in the best interest of our shareholders to discontinue the transaction process.
“We’ve built very strong relationships with the CannaCare Health team and will continue to evaluate joint opportunities in the future as they arise.”