Elixinol Wellness is to acquire The Sustainable Nutrition Group (TSN) in a move to strengthen both companies’ vision to be “global leaders” in the plant-based food, health and wellness sector.
Under the terms of the deal, which is expected to complete in March 2023, Elixinol shareholders will hold 70% of the combined group with TSN holding 30%.
The acquisition follows strategic reviews undertaken by both ASX-listed companies, during which Elixinol confirmed it was moving away from CBD in favour of plant-based wellness products.
Elixinol had considered a range of options – including the sale of the company – in a move to generate shareholder value.
TSN, which rebranded from Australian Primary Hemp Limited late last year, began its own review in July after losing a strategic customer supply agreement which saw the departure of managing director and chief executive Neale Joseph.
TSN produces, manufactures, and distributes a range of sustainable and plant-based nutrition brands – including hemp products – under four brands; Mt Elephant, Australian Primary Hemp, Field Day and The Australian Superfood Co.
In FY22, it generated revenue of A$3.47m, up 84% on the previous year, although losses increased 13% to almost $5m. FY23 first quarter revenue of $822,000 was in line with the same period last year.
The combined Elixinol-TSN operation will have eight brands and 143 products across the human nutrition, food, CBD, pet and wellness verticals.
Following the strategic reviews, it is expected the combined group will deliver cost savings of up to $6.6m.
Elixinol said in an announcement to the ASX: “The Elixinol Wellness Board has been actively conducting a strategic review of its business activities, which included consideration of merger, sale or other options for the company as a whole or its individual business units.
“The purpose of the strategic review has been the maximisation of shareholder value. As a result of the strategic review, and following completion of due diligence, the board… has identified the proposed schemes [of arrangement] as a preferred option to maximise shareholder value.”
Elixinol Wellness global chief executive Ron Dufficy said it had evaluated a number of businesses during its review and is “confident that The Sustainable Nutrition Group is a strong fit for Elixinol Wellness”.
“We are fully aligned in our vision to build a leading global plant-based food, health and wellness company and have identified many ways in which we can leverage our infrastructure and highly complementary product set in order to realise this vision,” he said.
The proposed acquisition will broaden Elixinol’s distribution in Australia from 2,300 to 4,100 locations, he added, and deliver “substantial cross-sell opportunities for EXL and TSN brands”.
“It will also enable Elixinol Wellness to obtain access to a fully integrated hemp growing network in Australia to support consumer preference for locally grown and produced products,” Dufficy said.
“We are particularly excited about the scale that we will achieve with this transaction. Increasing the size and scale of both businesses enables access to economies of scale and provides cost efficiencies to support the delivery of our profitability goals.”
TSN interim executive chair Pauline Gately said: “The combination of TSN and EXL creates a leading plant-based food, health and wellness company with a strong global distribution network.
“We immediately recognised the merits of combining the two highly complementary businesses to rapidly broaden the product range and share each other’s leading product development IP to drive cost-effective growth.”
Separate to the terms of the deal, Elixinol will provide a war chest of up to $2m to TSN to refinance existing debt and provide working capital.