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Cellular Goods PLC (LON:CBX) told investors it has signed a letter of intent for the potential acquisition of Cannaray Brands Ltd & Love CBD Health Ltd, which if completed will constitute a reverse takeover.
It envisages a transaction worth £14.2mln, of which £1mln would be paid in cash, and, would result in the seller, Cannaray Limited, holding a 54% shareholding in the enlarged company (rising to 61% if a £5mln year-one revenue target is achieved).
Cannaray’s leading consumer brands, Cannaray CBD & Love CBD, are sold in the UK cannabidiol (CBD) wellness sector, and, last year generated combined revenue of £2.3mln which is expected to grow as a result of national TV advertising, improved direct-to-consumer (D2C) online performance, and additional retailer listings.
Have you seen our NEW #CBD Revolution ad, featuring @claudiawinkleman? ???? pic.twitter.com/y8VuTGdJcg— Cannaray CBD (@CannarayCbd) June 8, 2022
If the transaction proceeds the majority of the Cannaray Limited directors will be appointed to the Cellular Goods board.
"We are pleased that we have reached this significant preliminary agreement with Cannaray Limited and look forward to working closely with them to conclude a transaction,” said Cellular Goods chair and now interim chief executive.
“This is an exciting step forward for Cellular Goods.
“The Cannaray Limited Board shares our vision of building a market leader listed on the London Stock Exchange.
"The enlarged company will benefit from a significant increase in group revenues, market presence, combined portfolio strength of complementary product lines addressing premium and mass consumer segments, and economies of scale in marketing, logistics and production.”
Anna Chokina, who today resigns as chief executive in view of the anticipated changes, added: he 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.”
Cannaray chair Andrew Garden, meanwhile, said: “This preliminary agreement is very positive news for our shareholders, as we seek to focus on the major growth opportunities within the European cannabis market.
“The combined capabilities, knowledge, people and brands of the Cannaray Subsidiaries and Cellular Goods will create a consumer business well placed to strengthen its leading position into the future.
"It has always been the intention of Cannaray Limited to list the business on a favourable stock exchange. We are excited to list our CBD division on the LSE via this reverse takeover with Cellular Goods, whilst we continue to privately build our medical and recreational cannabis divisions in the UK and Germany.
“Our intention for the future will be to list on a qualified exchange favourable for recreational cannabis businesses."