New Leader in German Cannabis Created with Acquisition of TruHC, Leading EU-GMP Medical Cannabis Producing Facility, on Historic Day Germany Legalizes Recreational Cannabis
- Acquisition expands Flora's presence in the German and European cannabis markets.
- TruHC's licenses and expertise complement Flora's global distribution network.
- Germany's changing cannabis legislation creates a favorable environment for market expansion.
- The transaction is valued at $6.4 million, with potential for further growth in the future.
- TruHC's executive team brings extensive experience in the cannabis industry.
- None.
Insights
The acquisition of TruHC by Flora Growth Corp. represents a strategic move in the burgeoning cannabis industry, particularly within the European market. The all-stock deal, valued at $6.4 million, suggests a forward-looking confidence in the sector's growth, especially considering the legislative shifts in Germany. From a market perspective, this acquisition could signal a consolidation trend within the industry, as companies aim to leverage synergies and expand their market footprint.
Flora's integration of TruHC's licenses, including EU-GMP processing and production, positions the company to capitalize on the expected market growth post-legalization. The control over the supply chain 'from seed to sale' is a significant competitive advantage, potentially streamlining operations and reducing costs. The anticipated market potential of over $10 billion in Germany alone underscores the high-stakes nature of this deal, with the potential to reverberate across the European Union, which is projected to see substantial consumer growth in cannabis products.
The legal landscape for cannabis in Germany is undergoing a transformative change, with the country poised to become a leader in the federally legal cannabis space. This shift not only impacts domestic policies but also sets a precedent for other EU countries. The acquisition of TruHC, with its extensive licensing and regulatory compliance, such as the EU-GMP certification and narcotics license, places Flora in a favorable position to navigate the complex legal framework surrounding cannabis in Europe.
Furthermore, the legal nuances of the international cannabis trade, such as import/export regulations and licensing for cultivation and distribution, are critical for Flora's future expansion. TruHC's readiness for instant cannabis analysis aligns with the new Cannabis Social Clubs model and could become a cornerstone for setting industry standards in quality control and regulatory compliance, which are essential for long-term success in this regulated market.
The pharmaceutical aspect of the cannabis market is particularly noteworthy in this acquisition. The medical cannabis market in Germany is projected to reach significant revenue milestones in the coming years and TruHC's existing infrastructure is well-suited to support this growth. The EU-GMP certified laboratory and production facility are critical assets that could streamline the path to market for medical cannabis products, a segment that demands stringent quality and safety standards.
Given the medical cannabis patient base in Germany and the broader EU, the potential for Flora to become a key supplier is substantial. It's important to note that the medical cannabis market often serves as a gateway to broader acceptance and use, indicating that Flora's early investment in TruHC could yield long-term dividends as the recreational market matures alongside the medical sector.
- Acquisition capitalizes on TruHC's leading German cannabis platform, including:
- EU-GMP processing and production license
- GDP wholesale license for import / export
- EU-GMP certified customizable modules with flexibility to incorporate various production / packaging processes and which enable license extension for future in country cultivation and supply to cannabis dispensaries
- Narcotics license with EU-GMP certified storage
- EU-GMP certified laboratory for instant cannabis analysis
- Transaction combines Flora's extensive global CPG and pharmaceutical distribution network with TruHC's deep global cannabis expertise, including an executive team with extensive experience building successful medical and recreational cannabis companies across Germany, Canada, and the United States.
- Germany is expected to become world's largest federally legal cannabis market with expected market potential of over
$10 billion with federal legalization and the critical elimination of banking, financial, capital markets, and tax constraints faced by U.S. operators. - Germany sets the leadership example for the burgeoning European cannabis market across newly legalized jurisdictions, with the transaction providing Flora the ability to control its entire European supply chain from seed to sale and to generate critical distribution and analytical services throughout Europe, a massive untapped market nearly 1.5x the combined populations of the United States and Canada.
Fort Lauderdale, Florida--(Newsfile Corp. - April 1, 2024) - Flora Growth Corp. (NASDAQ: FLGC) ("Flora" or the "Company"), a cannabis focused consumer-packaged goods leader and pharmaceutical distributor serving all 50 states and 28 countries with 20,000+ points of distribution around the world, has entered into a binding Letter of Intent (the "Agreement") to acquire TruHC pharma GmbH ("TruHC") in an all-stock deal in exchange for 2,770,562 Flora common shares, valued at
Acquisition Rationale
Historic German Legalization Moment
- Effective today, adults over the age of 18 in Germany are to be allowed to possess up to 50 grams of cannabis for private consumption and grow up to three plants. Adults will be allowed to join nonprofit social clubs with a maximum of 500 members each starting July 1, 2024. Individuals will be allowed to buy up to 25 grams per day, or a maximum of 50 grams per month.
- With the largest population and greatest purchasing power in Europe, Germany boasts Europe's fastest growing cannabis market. With the following 2 phases of German legalization expected in the coming 12-18 months, Germany is expected to become the largest and most important federally legal adult use cannabis country globally, with expected market potential of over US
$10 billion . - The new Cannabis legislation is also expected to significantly increase the medical cannabis market in Germany, which is anticipated to witness a substantial growth in revenue, with projections estimating it to reach US
$1 billion in 2024 and €7.7 billion by 2028 in addition to the recreational market.
Germany Leads the Way for Europe
- The new cannabis law positions Germany as the leading example for other European countries in relaxing restrictions for cannabis use and sale, with other countries such as the Netherlands, Switzerland and the Czech Republic announcing various forms of adult use legalization since Germany's announcement in 2021.
- With a current illicit EU cannabis market size of US
$13 billion , and 448 million people living in EU countries only4.8% of which are currently consuming cannabis, European market potential after legalization is projected to potentially reach 100 million European cannabis consumers, larger than the United States. - With approximately 230,000 medical cannabis patients, Germany continues to lead the way in European medical cannabis as well. Following Germany are Italy, the Netherlands, Poland, Denmark and the Czech Republic, with the total number of cannabis patients in Europe is estimated to be 500,000 in 2023, and growth of around
500% is expected over the next five years.
TruHC is Purpose Buit for this Moment
- Based in Hamburg, Germany, TruHC holds a GDP wholesale, and an EU-GMP processing and production license for medical cannabis. It also owns and operates an EU-GMP certified laboratory ready for instant cannabis analysis as required for the new Cannabis Social Clubs.
- The facility of TruHC is a flexible production space with EU-GMP certified modules that can be extended and customized for any production process from processing to extraction and enables a license extension for a future in country cultivation of medical cannabis and supply of cannabis dispensaries expected to be opened in 2025 during phase 3 of legalization. TruHC also holds a narcotic license with EU-GMP certified storage.
- TruHC's licenses were obtained with Germany's forthcoming legalization in mind. They allow TruHC to apply for new medical cannabis & cultivation licenses and become an official cannabis test lab for upcoming cannabis social clubs. It also enables extensive international import of seeds and flowers for future distribution in what is expected to become the largest federally legal recreational cannabis market in the world.
- TruHC's executive team, led by CEO Hendrik Knopp, brings proven leadership in international cannabis operations, manufacturing, facilities buildouts, and license acquisition, including winning the first tender for the cultivation of medical cannabis in Germany for Tilray (formerly Aphria). The TruHC team has held senior leadership positions at Nuuvera and Tilray (formerly Aphria) and made significant foundational private equity investments in leading U.S., Canadian and European cannabis operators.
"The acquisition of TruHC is expected to provide Flora with the runway it needs to maximize the benefits of Germany's cannabis legislation. We intend to touch on many verticals in the medical and recreational cannabis realms in Germany. We anticipate becoming a leader and at the forefront of the industry, which has the potential to spread to the rest of Europe. TruHC brings an EU-GMP facility and a management team that pioneered the cannabis industry in Germany to the Flora family. Together, we are excited to assume pack leadership in a sector poised for explosive growth," said Clifford Starke, Chief Executive Officer.
"This transaction marks the culmination of months of close cooperation and strategic planning. By joining forces, we have created a leader in German cannabis at a uniquely opportune time," said Hendrik Knopp, Chief Executive Officer of TruHC.
Transaction Summary
The aggregate purchase price of
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About Flora Growth Corp.
Flora Growth Corp. is a cannabis focused consumer-packaged goods leader and pharmaceutical distributor serving all 50 states and 28 countries with 20,000+ points of distribution around the world. For more information on Flora, visit www.floragrowth.com.
https://www.phatebo.de/home-en
Investor Relations:
Investor Relations ir@floragrowth.com
Clifford Starke Clifford.Starke@floragrowth.com
Media:
Cautionary Statement Concerning Forward Looking Statements
This press release contains "forward looking statements," as defined by federal securities laws. Forward-looking statements reflect Flora's current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words "believe," "expect," "anticipate," "will," "could," "would," "should," "may," "plan," "estimate," "intend," "predict," "potential," "continue," and the negatives of these words and other similar expressions generally identify forward looking statements. Such forward looking statements are subject to various and risks and uncertainties, including those described under section entitled "Risk Factors" in Flora's Annual Report on Form 10K filed with the United States Securities and Exchange Commission (the "SEC") on March 28th, 2024, as such factors may be updated from time to time in Flora's periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov/edgar. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in Flora's filings with the SEC. While forward looking statements reflect Flora's good faith beliefs, they are not guarantees of future performance. Flora disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this press release, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based on information currently available to Flora (or to third parties making the forward-looking statements)
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