M&A ferment continues in CBD space with new deals
In one deal, CanaFarma Hemp, a New Jersey-based firm, announced it has signed a letter of intent to acquire Avitas Bio.
In a related deal, a company called Vertical Wellness, which has been marketing a line of CBD products branded with model and businesswoman Kathy Ireland’s name and image, is in the process of finalizing a merger with CanaFarm Hemp.
Mergers to bring manufacturing, branding capabilities under one roof
CanaFarma Hemp is publicly traded company based in Vancouver, BC. The company markets a line of tinctures and a brand of chewing gum and reportedly has a line of CBD chocolates in development.
The CanaFarma-Vertical Wellness merger was valued at $50 million when it was first announced in July. The state goal was to make it the “first house of CBD brands to be publicly traded.”
Avitas Bio is a marketer of herbal extracts aimed at various conditions such as migraine, menopause and joint discomfort. The company’s products include herbal extracts of Devil’s Claim (Harpagophytum procumbens), Feverfew (Tanacetum parthenium) and Gingko biloba.
Under the proposed new combination Avitas Bio will produce the CanaFarma chocolates in its New York production facility. The announced terms of the deal include a grant of 30 million common shares of CanaFarma to Avitas Bio in return for all of Avitas Bio’s shares.
“Avitas Bio has developed a series of products addressing today’s most pressing health and wellness challenges, and our platform is poised to take the company to the next level,” said Vertical Wellness CEO Smoke Wallin. Wallin also recently concluded a deal to launch a CBD infused beverage in cooperation with professional skateboarder Paul Rodriguez.
Second deal focused in southern Colorado
In another recent deal, CBD Global Sciences, Inc., which is based in Lakewood, CO, has announced an agreement to acquire 100% of a company called Resinosa. CBD Global Sciences is also publicly traded.
Resinosa, based in the southern Colorado town of Silver Cliff, operates a GMP certified extraction facility that is billed as having a capacity of 1,320 kilos of full spectrum CBD oil per month.
“Throughout my many years in corporate and private company management I found it critical to surround myself with extremely smart and talented people. I’ve been able to get to know and respect the team that Resinosa brings to the table and am ecstatic to see them join the CBD Global family,” said Brad Wyatt, CEO of CBD Global Sciences.
CBD Global Sciences currently markets products under two brand lines. Aethics is focused on sports nutrition consumers, while Cannaoil includes tinctures, capsules, topicals, hydration products and confectionary products.
Investor: Public markets liquidity attractive
Patrick Rea, manager of an investment fund that focuses all aspects of the cannabis markets, said there are a number of drivers of recent M&A activity in the cannabis space. With the large number of small firms in the market, some sort of shakeout seemed inevitable. But he said it shouldn’t be seen just as a story of stronger companies snatching up the assets of weaker ones at fire sale prices.
“In the case of acquirers that are public or have plans to go public that liquidity can be really appealing for companies or founders in the hemp an CBD industries who need to pay back investors or who just want to move on,” Rea told NutraIngredients-USA.
“We don’t know what state the acquired companies are in until the deals close and we can look at the public filings. But there are cultivator and extractor brands that are doing well in this market,” he added.
Rea said the ongoing regulatory uncertainty continues to distort the market, and might make for a situation in which some less well capitalized startups are unable to make it to the finish line.
“It’s hurting the growth prospects of the industry immensely. What we have now is an overbuilt supply chain with stunted retail distribution and investment while consumer demand remains high. It’s like you’re a bird with a chain around its leg,” Rea said.