FORT LAUDERDALE – Flora Growth Corp. (NASDAQ: FLGC), a global leader in consumer-packaged goods and pharmaceutical distribution, has announced the acquisition of TruHC Pharma GmbH, a German cannabis company with a comprehensive platform of EU-GMP certified licenses and facilities. The deal, valued at $6.4 million, will be settled through the issuance of Flora common shares and is expected to close by the end of April 2024.
The acquisition comes as Germany, with the largest population and highest purchasing power in Europe, is on the brink of becoming the world's most significant federally legal cannabis market. The estimated market potential exceeds $10 billion, following federal legalization and the removal of banking and financial constraints that currently hinder U.S. operators.
TruHC, based in Hamburg, is strategically positioned for the upcoming expansion of Germany's cannabis market, holding an EU-GMP processing and production license, a GDP wholesale license, and an EU-GMP certified laboratory ready for immediate cannabis analysis. This infrastructure is expected to play a pivotal role in the establishment and support of the newly legislated Cannabis Social Clubs in Germany.
The German market is set to further liberalize, allowing adults to possess, cultivate, and purchase cannabis under regulated conditions. TruHC's facilities and licenses will enable the company to apply for new medical cannabis & cultivation licenses and to become an official test lab for the emerging social clubs.
Moreover, TruHC’s executive team, with a track record of success in the cannabis industry across Germany, Canada, and the United States, is anticipated to bolster Flora's expansion efforts in the region.
The transaction involves two closing stages. Initially, Flora will issue 2,135,199 shares, representing 19.99% of its current common shares. Following shareholder approval, an additional 635,363 shares will be issued. Flora's subsidiaries have been active in Germany since 2017 and were responsible for selling the first gram of medical cannabis in the country.
Aegis Capital Corp. served as the Financial Advisor for the agreement. This strategic move is expected to position Flora as a leading player in the German cannabis market, as the country prepares for a significant shift in cannabis legislation and market dynamics. The information is based on a press release statement.
InvestingPro Insights
As Flora Growth Corp. (NASDAQ: FLGC) embarks on its strategic acquisition of TruHC Pharma GmbH to bolster its position in the burgeoning German cannabis market, several key metrics and InvestingPro Tips from InvestingPro provide a deeper financial perspective on the company.
InvestingPro Data highlights that Flora Growth holds a market capitalization of $19.27 million. The company has experienced a remarkable revenue growth rate of 127.75% over the last twelve months as of Q4 2023, with its most recent quarterly growth at 70.38%. Despite the impressive top-line growth, Flora's profitability challenges are evident, with a negative adjusted P/E ratio of -1.19 for the same period.
InvestingPro Tips underscore the company's financial position and market performance. FLGC holds more cash than debt, which is a positive sign for liquidity and financial stability. Additionally, analysts expect an increase in net income and sales growth in the current year. However, it's important to note that the company has been quickly burning through cash and has been unprofitable over the last twelve months. Moreover, the stock has been identified as trading with high price volatility, which may be a consideration for risk-averse investors.
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