RotoGro shares crashed 6% as they got lifted from suspension following the release of acquisition announcement. It last traded at $0.470 today, i.e. 29 October 2018.
RotoGro International Limited (ASX: RGI) today announced the acquisition of licensed Canadian Cannabis Processor, Supra THC Services Inc. It will include the takeover of 100% of the issued share capital of Supra THC from the holder Valens GroWorks Corp at the purchase consideration of CAD $11,000,000.
It has been stated that 80% of consideration will be discharged in the form of RotoGro share capital at an offer price of A$0.40 per share while the remaining 20% is said to be paid in cash.
Supra THC holds the Dealer’s License issued by Health Canada that permits possession of cannabis and related active ingredients, in addition to the production of extracts for the purpose of analysis. This Dealer’s License will enable RotoGro to undertake standard processing, analytical testing, research, production, sale and distribution of cannabis.
Managing Director of RotoGro, Michael Carli stated that the acquisition of Supra THC is a massive step forward in the Company’s strategic growth plan to establish itself as a global leader in the cultivation of cannabis and perishable foods. He added that besides having dialogue with Health Canada, the company has identified the location to establish its cannabis operations, that is nearby company’s current facility located in Caledon, Ontario. Further, the phase one cost of the facility is estimated to be CAD $500,000.
With this acquisition, RotoGro can now have its own cannabis production in Canada backed by the law. It provides a cutting edge to RotoGro in Australian market where most of the cannabis companies face barriers in clinical trials without which product cannot be released into the market.
The company has appointed Michael Di Tommaso, a senior executive with experience in Cannabis Legislation, as Operations Manager for Cultivation. He is entrusted with the responsibility to look over the license renewal, the amendments that need to be made to acquire the permission for additional cultivation methods and building a suitable 44,000 square feet facility.
Chief Executive Officer of Valens, Tyler Robson stated that application of RotoGro’s automated hydroponic rotary garden technology to the indoor vertical farming space will bring in long-term innovation and commercial opportunities to the business, that will resultantly be the win-win for company’s shareholders.
RotoGro expansion plans for Canadian cannabis market are underpinned by legalization of cannabis in Canada. On October 17, 2018 the Canadian government legalized the recreational use of cannabis nationwide. The cannabis demand in Canada is estimated to 610 tonnes out of which just 30 to 60% of it can be met by current production levels.
As per the data published by Deloitte, the total cannabis market in Canada is expected to generate total sales of approximately $7.17 billion in the year 2019. Subsequently, the market capitalization of cannabis focused companies has crossed the threshold $10 billion.
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