Golden Leaf Holdings (GLH.C)(“GLH”) added another strategic asset to its portfolio when the company announced today that it had entered into a definitive agreement to acquire all the issued and outstanding shares of Medical Marihuana Group Corporation (“MMGC”) and Medical Marihuana Group Consulting (“MMCC”).
According to the news release, MMGC has applied with Health Canada for a license to cultivate cannabis and as such, has no substantial operations until it receives its license.
In the agreement, GLH will snap up MMGC for $10.0 million in GLH common shares at $0.28 per share and it will also indirectly grab MMCC for up to $5.0 million in GLH common shares – also at $0.28 per share.
The MMCC payment is contingent on certain gross sales targets being met within 18 months of marketing efforts commencing in Canada for GLH-branded products.
AG Financial Group serves as advisor to GLH for this transaction as well as three other previously announced acquisitions.
The company expects to drive shareholder value as well as future revenue streams and feels this acquisition will strategically position the company’s brand platform into a relatively nascent market on the verge of exponential expansion.
Not only will the deal create a solid foothold in the Canadian legalized cannabis market as it continues to expand, but this acquisition will build a beachhead for the company to launch its GLH-branded products into international markets.
Management intends to leverage its deep experience of growing, extraction, refining, sales and marketing with this acquisition to get a head start with cannabis oil related products in the Canadian market.
Company CEO, Don Robinson, commented, “The acquisition of Medical Marihuana Group provides our company and shareholders with a significant opportunity to become one of the first global companies to operate across North America and international markets through Canada.”
He went on, “GLH will leverage its location in Canada to develop and open up new market opportunities, including expanding branded oils, edibles and flower into the Canadian marketplace. The objective is to build a robust product portfolio positioned for targeting both medical patients and adult-use with expected recreational legalization in 2018.”
There are a little over 40 licensed producers in Canada right now and as Health Canada ramps up its approval process in preparation for legalized recreational weed in 2018, it is not unreasonable to expect the number of LPs to rocket before then. After all, it’s estimated we’re going to need approximately 750,000 kilograms a year to keep Canadian recreational pot smokers happy.
Companies like GLH continue to move in a marijuana market plagued by investor fatigue so when the flood gates open, they’re riding the wave, instead of drowning in it.
The next eight months are crucial for GLH.
FULL DISCLOSURE: Golden Leaf Holdings is an EQUITY.GURU client.