Mr Tamir told BusinessCann it was looking for a deal that supported its growth by opening up new distribution channels, providing additional control of its source material and access to the German market.
He said: “Our weak spot is Germany – the major European market for medical cannabis. We were looking for a business that would allow us to build-up our independence through processing and production to pharma grade quality, and deliver distribution into Germany and elsewhere. Materia are a perfect fit – it was love at first sight!.”
Trio Of Key Assets
Kanabo was one for the first cannabis companies to list on the London Stock Exchange (LSE) earlier this year with its USP being the VapePod device allowing for metered, medical cannabis dose-delivery.
Materia has a trio of key assets which will dovetail into the Kanabo portfolio. These include a pharmaceutical wholesale operation in Germany which it acquired from Cannaktiv in May 2020.
This has EU-GDP and EU-GMP certificates enabling it to import and sell medical cannabis products to German pharmacies.
In Malta it recently secured EU-GMP approval for its processing plant which has the capacity to handle six tonnes of dried flower a year – worth potentially €36m – and will soon be able to produce cannabis extracts.
And, in the UK it owns the sales platform Handpicked CBD. Materia has its own CBD ranges with the Hiatus vape pen and Pure Ratios’ transdermal patch.
Nick Pateras, Materia Managing Director, Europe, said: “We have the established distribution channels in Germany and the market is now at the point of wanting innovative products, not just anything that can be grown.
“With Kanabo’s VapePod and extract formulas, and by leveraging our supply chain and cultivation base around the world, we will be able to deliver those products.
“We are now looking at the next chapter of the German market. The disruptors to the market will be high-quality flower and vaporised extracts and tinctures.”
The all share-based transaction – believed to be worth several million pounds – will see Materia fully- integrated into the Kanabo Group with the division being given immediate access to a loan facility of around £1.4m.
Almost £290,000 (CA$500,000) of this will be available on completion, with the remainder to be drawn down, subject to milestones, for six months from the deal date.
The first share payment will be made on the approval of the transaction and the second payment will be made subject to Materia achieving certain pre-agreed milestones.
These include sales of £17.3m within two years and certain key performance indicators such as the Maltese facility achieving breakeven status.
Commenting on the sales targets Mr Pateras said: “It demonstrates the confidence around the table… and we are excited and motivated to hit them.”
Materia was founded in Toronto late 2018 with funds coming from private, non-brokered investors who had previously invested and exited with cannabis companies, said Mr Pateras.
This has got them to the point where they are today. He said it was not in a position to disclose its annual revenues.
He said the immediate loan payment of £288,000 would provide it with the funds to accelerate its plans.
“We are close to a couple of important milestones. One is to complete the Malta facility to sell into Germany and, secondly, plan for prescription generation of the product. This adds the velocity to press ahead with these plans,” he added.
Mr Tamir said Materia could have taken another convertible note, however this loan arrangement ‘provides Materia’s management the comfort that we are serious and to ensure that Materia are motivated to get the deal done quickly’.
Deepak Anand, CEO of Materia, said: “We are excited at the prospect of joining forces with Kanabo’s team.
“As the first medical cannabis company approved to list on the London Stock Exchange, Kanabo’s ambition to be a market leader matches our own and we believe that our combined infrastructure will generate significant value for our shareholders, partners, customers and patients.”
Research conducted by Kanabo will be commercialised through Materia Malta’s facility, including formulas developed for Kanabo’s VapePod device and targeted to treat specific medical conditions such as insomnia, PTSD, neuropathic pain and anxiety.
Mr Tamir said Materia’s brand name is ‘strong’ and will be maintained as a trademark. When the deal completes Kanabo will have over 40 staff with around half of these joining from Materia.
Kanabo’s shares rose by over 8% in trading yesterday finishing on 16.87p. It has a market cap of £55m.