The deal for Zelira Therapeutics to buy Health House International is off after both parties agreed to walk away, blaming the “substantial change in market conditions” since it was announced in February.
Under the scheme of arrangement, Zelira would have acquired 100% of Health House shares subject to due diligence. Health House would have taken a 19.45% interest in Zelira.
At the time, Zelira founder and chairman Osagie Imasogie said the acquisition would give the company “control of direct access to highly regulated European markets for its products”.
Health House founder and chairman David Wheeler described it as a “proposed merger” that would deliver “strategic opportunities to increase margins and save costs”.
In a short statement to the ASX, Zelira said the deal was terminated after “mutual consultation” following what it cited as substantial changes in market conditions.
Issuing a more expansive statement, Health House said consultation with “key stakeholders” raised concerns that it would not get sufficient support from shareholders “in the current circumstances”.
Wheeler said: “The proposed merger was borne out of a perception that the shareholders of Health House and Zelira would derive significant benefits from a combination of the two businesses, with significant operational and strategic advantages perceived to be achievable in the medium to long term.
“However, the recent substantial change in market conditions affecting both entities has required a re-evaluation of that approach. In conjunction with input from key stakeholders, the board now takes the view that alternative strategies must be explored.
“To that end, we expect to be able to provide a further update to the market in due course.”
As part of the scheme, Zelira provided Health House with a short-term loan of $1.5 million to help with its immediate working capital requirements.
Health House will now make an immediate payment of $50,000 as a result of the termination and be required to repay the $1.5 million loan, plus interest, within 60 days.
Speaking to Cannabiz last month, Zelira global managing director and chief executive Dr Oludare Odumosu said a distribution company such as Health House becomes “very key to the supply chain” and would “streamline our distribution path”.
Asked if he could foresee any obstacles to the deal proceeding, Dr Odumosu said: “There are always obstacles and one must always be cognizant of these obstacles.
“Health House must be convinced that this is a good deal for them and they must deliver the votes to move this forward. If that happens, great. If that doesn’t happen, great. Zelira as a standalone company will continue to do business with Health House.
“Do I personally want this to happen? Yes, 100%. But I always put a caveat on that. If it doesn’t happen it’s not the end of the world. Zelira will still be in a great position and we’ll move forward.”
Zelira is a biopharmaceutical company in the research, development and commercialisation of clinically validated cannabinoid medicine.
Health House distributes medicinal cannabis across Australia, the UK and Europe and is also a licensed importer and exporter.