Less than a week after it announced it will delist from the TSX and start trading on the Canadian Securities Exchange, a Gatineau-based developer of hemp products is joining forces with a major Canadian grower of the plant in a bid to capture a larger share of the North American and international markets.
LiveWell Canada (CSE:LVWL) said Monday it has agreed to acquire Canadian-based Vitality CBD Natural Health Products and its U.S. subsidiary.
A portfolio company of Smiths Falls-based Canopy Growth’s investment arm, LiveWell develops products from the non-psychoactive compound in cannabis, CBD. Structured as a reverse takeover, the new deal will see LiveWell transfer enough shares to Vitality’s owners to give the privately held firm an 85 per cent stake in the new combined entity.
Financial terms of the agreement, which is still subject to regulatory approval, were not disclosed.
In a news release, the partners said the deal will make the new company one of the largest hemp cultivation and CBD extraction operations in North America. Vitality is currently harvesting the plant on 20,000 acres of property – 19,000 on 33 farms in Montana and 1,000 acres at a farm in Alberta.
The new firm, which has yet to release its name, is expected to be producing up to 3,000 kilograms of hemp a month by the second half of next year.
The commercial market for hemp CBD products is predicted to grow rapidly in the next several years, with the Brightfield Group of Chicago projecting the North American market for CBD from hemp could hit $22 billion by 2022.
Last week, the chairmen of the U.S. Senate and House agricultural committees announced they’d reached an agreement in principle on a plan to legalize industrial hemp – a move that is expected to “dramatically impact the demand for hemp products in the United States,” LiveWell said.
LiveWell CEO David Rendimonti, who will also become chief executive of the new firm, said the combined company will have the research expertise to come up with new products for a rapidly evolving market as well as the production capacity to meet growing customer demand.
“This transaction is about meeting and satisfying patient and consumer needs,” he said in a news release. “While North American markets are the primary focus for wholesale and consumer sales initially, European and South American markets are also on the horizon for the (new company).”
The company will be headquartered in Ottawa, with additional operations in Gatineau, Las Cruces, N.M., and Eureka, Mont. According to the news release, the new firm plans to list on “one of the major stock exchanges in the United States” once the transaction closes.
“As the cannabis and hemp industry grows and matures, we believe the combined organization better positions us for large-contract opportunities, greater market awareness and long-term success,” Vitality CEO Robert Leaker, who will be president and chief operating officer of the company, said in a statement.
“We’ll have the resources to rapidly scale to meet the anticipated explosive demand in newly legalized CBD markets worldwide, we’ll have broader management experience, and we already share a vision of excellence backed by research and science.”
The latest transaction continues a busy 2018 for LiveWell.
In November, the firm announced it had closed a non-brokered private placement that raised $1.55 million. Earlier this year, the Gatineau company converted an Ottawa greenhouse into a growing operation earlier this year and it reported its first public earnings this fall. In October, LiveWell acquired a Windsor-area company in a deal worth $20 million.