Cann Group to invest NZ6 million in Pure Cann for 20% stake

CAN

Cann Group Limited (ASX: CAN) is an ASX listed healthcare company working specifically in the medical cannabis sector. The company was given the first cannabis research licence in Australia and now cultivating and manufacturing medical cannabis for sale in Australia. The company has also collaborated with other partners to establish a leading position in the sector.

Investment Details

On 26th April 2019, the company announced that it has completed an investment in a New Zealand based medicinal cannabis company, Pure Cann NZ Limited. According to the investment agreement, Cann Group will be shelling out NZ$6 million to acquire 20% ownership stake in the company.

The investment will be made in several tranches with 10% to be completed on or before 30 August 2019. Another 10% will be invested after Pure Cann’s Board approving the construction of its commercial cultivation facility and the new regulations by the New Zealand government coming into force. This investment can also be increased to 30% on the Cann Group’s discretion.

Apart from the strategic investment, both the companies have also entered into a Technical Services Agreement (TSA). The aim of this agreement is to accelerate Pure Cann’s growth plans. Under the agreement, the intellectual properties of both companies can be mutually used.

Anticipation of regulatory changes by the New Zealand government

The New Zealand government is expecting the introduction of new changes in the regulations, licensing requirements and quality standards regulating the medicinal cannabis usage by the end of this calendar year. Pure Cann is confident of creating a market leading position in the expectation that new regulations will permit the cultivation and increase the supply of medicinal cannabis in New Zealand.

Key personnel’s statement

Peter Crock, CEO of Cann Group, stated this investment would help both the companies to work in alliance and capitalise the increasing local demand for medicinal cannabis in New Zealand. This collaboration will also aid in exploring other potential export opportunities as Pure Cann is working on its proposed cultivation and production facilities.

Cann Group’s board is happy with the Pure Cann’s business plan calibre and expertise of the people associated with the company. Pure Cann’s executives have vast experience in horticulture, nutraceutical and pharmaceutical sectors. Pure Cann has proposed to develop a range of organic medicinal cannabis products for exporting opportunities and Cann Group is confident that Pure Cann will be able to develop premium and natural products by leveraging New Zealand’s global reputation.

Rob Fyfe, Executive Chairman of Pure Cann, stated this is an important moment as Cann Group’s strategic investment in Pure Cann not only recognises the confidence and potential of the company but also of New Zealand and our broader pedigree in horticulture and agriculture.

The strategic investment and Technical Services Agreement together will ensure that the pure Cann is sufficiently funded to quickly become a leader in New Zealand’s rapidly growing medicinal cannabis industry.

On 21st March 2019, the company released its investors’ presentation in which it talked about the recent financial performance and operational updates. Recently it also updated about its expansion plans and a new offtake agreement with Aurora Cannabis Inc

Stock Performance

The market capitalisation of the company is ~A$338.08 million. The 52 week high and low of the stock is A$3.88 and A$1.525 respectively. The stock is trading 1.24% lower at A$2.39 as of 26th April 2019 (AEST: 1:15 PM). The last six months return of the stock is negative 3.97%, while YTD return stands at 21%.


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