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Cellular Goods PLC on Monday said that it has signed a letter of intent with Cannary Ltd to acquire Cannary Brands Ltd and Love CBD Health Ltd.
The London-based lab-made cannabinoid consumer products company has agreed to pay £14.2 million, consisting of £1 million in cash alongside ‘a number’ of new Cellular shares for the two companies. The companies are subsidiaries of Cannary Ltd. Cannary will become a 54% shareholder in the enlarged group. Should the transaction be completed, it would be a reverse take-over.
Cellular has also agreed to make further performance-based share payments. If Cannaray Brands and Love CBD generate over £5 million in revenue within the first full financial year, then Cannary will become a 61% shareholder. If they generate over £7.5 million, then it will become a 64% shareholder.
The Cannary subsidiaries had combined revenue of £2.3 million in 2021 and further revenue growth is expected on the back of national TV advertising, improved direct-to-consumer online performance, and additional retailer listings.
The brands offer a range of ingestible cannabidiol products published on the UK Novel Foods register and are sold through 1,500 retailer outlets and direct-to-consumer branded websites.
‘The proposed acquisition will create long term value for shareholders by bringing together two complementary businesses with significant growth opportunities, scale benefits and an enhanced market presence with established brands,’ Cellular commented.
In light of the proposed merger, Chief Executive Officer of Cellular, Anna Chokina has resigned from the board. She will be replaced on a temporary basis by Darcy Taylor, current non-executive chair. Taylor will lead the merger talks.
Chokina said: ‘The proposed transaction makes a lot of strategic sense by bringing together two of the most recognised and complementary cannabinoid brands on the UK market. I am excited for the prospects of the proposed transaction and I am leaving Cellular Goods with healthy business fundamentals, clear and meaningful strategy, and a top-performing team. I wish the incoming management every success.’
Shares in Cellular Goods were trading 3.2% lower at 2.13 pence in London at midday.
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