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Medicinal Cannabis Acquisitions Show Industry Maturing

The New Zealand medicinal cannabis industry is celebrating two major acquisitions by key players.

Rua Bioscience (NZX:RUA) and Cannasouth (NZX:CBD) told the market today they have made strategic moves that will provide commercial benefits to their businesses.

Sally King, executive director of the New Zealand Medicinal Cannabis Council, says the developments show the cannabis sector in New Zealand is maturing and attracting strong investor interest.

“It shows there will be further co-operation and consolidation in the industry as it grows to become both a domestic supplier of medicinal cannabis product and also a strong exporter,” Ms King says.

Cannasouth was first to tell shareholders that it had entered into an unconditional agreement to acquire the balance of the stake it does not own in its cultivation joint venture. It will acquire the 50% from Aaron Craig and his family interests and shareholder loans advanced by the Craig Family for an aggregate purchase price of $3,540,000.

Mark Lucas, Cannasouth’s CEO, says there is a strong global demand for premium-grade, pharmaceutical cannabis flower, which is the high value niche Cannasouth Cultivation is targeting.

The completion of the deal means Cannasouth now wholly owns all group entities after completing the acquisition of an outstanding 40% in Midwest Pharmaceuticals NZ in August this year.

Rua Bioscience told market soon after its NZX stablemate that it has entered into an agreement for $10 million to acquire 100% of Zalm Therapeutics, subject to shareholder approval.

Zalm, which former Air Zealand CEO Rob Fyfe chairs, has Australia’s leading listed medicinal cannabis company Cann Group (ASX: CAN) as one of its key shareholders and partners.

Rua says the deal will give it earlier access to GMP, export-quality oil at scale by mid-2022. It will also have access to preferential pricing and long-term supply agreements through Cann’s scale and GMP capability.

Cann is in the final stages of commissioning one of Australasia’s largest and most technologically advanced indoor growing facilities.

Rua says it will now build a beachhead presence in target markets ahead of production coming on stream at Tairāwhiti. It also plans to invest m ore than $7.5 million in sales and marketing locally and internationally over the next four years.

Trevor Burt, Rua’s chair, says combining speed to market with long-term preferential access to substantial volumes of competitively priced product will enable Rue to build a meaningful market presence faster and with greater economy of scale.

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