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Halo Collective Signs a Letter of Intent to Acquire Phytocann Group, a Leading European Wellness CBD Company
Phytocann's audited 2020 revenue and earnings before taxes, depreciation, and amortization ("EBITDA") were approximately €5.3 million and €1.2 million, respectively, for the twelve-month period ended December 31, 2020 . Phytocann is expected publish audited numbers for the period ended December 31, 2021 within the next 90 days. After the Planned Acquisition is completed, Phytocann's management projects net revenues and EBITDA of approximately €17 million and €4.3 million, respectively, for the first twelve-month period. These projections are based solely on Phytocann's existing European business driven by traditional and e-commerce revenue, and do not include contributions from Halo's operations non-THC company portfolio, and the launch of Phytocann's brands and e-commerce platforms into the United States .
The European cannabinoid market in Europe in 2021 was estimated to be approximately €4.6 billion and is projected to grow to €25.9 by the year 2027. In comparison the U.S. market is expected to be approximately $18 billion in the same period.
Phytocann was founded in 2017 by Alexandre-Henri Lacarré and headquartered in Villeneuve, Switzerland . The Company is vertically integrated from seed to sale, serving multiple market segments with a range of brands including 260 products that are distributed to over 1,000 stores in Switzerland and France . In addition, Phytocann is a wholesaler of bulk dried hemp flower and concentrates that are low in THC, but contain CBD, CBG, and CBN. The Company has recently launched business-to-business and business-to-consumer e-commerce platforms that primarily target French speaking customers. Phytocann currently has six operating wellness CBD franchised stores, five in France and one in Cyprus , and intends to add 30 more over the next 24 months. The Company has also developed its own vending machine, Qanabox, three are currently installed in stores with plans to add 50 more over the 12 months. Phytocann has over 100,000 ft ( 10,000 m ) of hybrid greenhouses canopy in Switzerland , which has an annual growing capacity of up to 11,000 pounds (5,000 kilograms) of premium indoor hemp.
The Company's brand lineup currently consists of Ivory Swiss Premium, Harvest Laboratoires, Easy Weed, Kanolia, Herboristerie Alexandra, Buddies, Ghosty Buds, and Qanabox.
Following the acquisition of Phytocann, Halo management is expecting to create two separate companies under Halo Collective, a THC focused entity, and a non-THC focused entity:
"The potential acquisition of Phytocann is a cornerstone of our shareholder value enhancement strategy," commented Kiran Sidhu , Halo's Chief Executive Officer. "Phytocann brings multiple, premium-branded CBD products that complement Halo's existing wellness offerings developed for the United States market. In addition, we see meaningful synergies with Halo's recent acquisitions of Dissolve Medical, H2C Beverages, Simply Sweet Gummies, and Hushrooms. Halo's distribution agreement with Sway Energy is also expected to be contributed. Importantly, the addition of Phytocann's high-margin CBD business is projected to be immediately accretive to Halo's bottom line. We believe that by separating the THC and non-THC businesses, we can significantly enhance value creation for all of Halo's stakeholders. We expect PIT to follow a similar path to Akanda Corp. (NASDAQ: AKAN)."
Halo is expecting to form PIH under the laws of Ontario, Canada , and to transfer all CBD beverages, candy, dissolve strips, U.S. distribution agreements, and any other non-THC product assets of Halo to PIH, subject to Phytocann's approval and due diligence. As a result, PIH will be 100% held by Halo. PIH would then acquire 100% of the business and assets held directly or indirectly by Phytocann.
Under the terms of the LOI, Halo is offering upfront consideration of €12.2 million (the "Upfront Consideration"), with a further potential earn-out (the "Earn-Out Consideration") of up to €87.8 million in debt. The consideration is contemplated to be paid as follows:
The LOI contemplates that the Vendor Note and the Earn-Out Note will be repayable: (i) in cash, or (ii) at the election of the vendors, in shares of PIH. In the event that the Vendor Note and the Earn-Out Note are converted into shares of PIH, it is contemplated that they will convert at a price that results in the parties' ownership interests in PIH reflecting the relative cost of the parties' investments, (i) with Halo's being equal to the value of the share consideration and the book value of the non-THC businesses contributed to PIH by Halo, and (ii) with the vendors being equal to the principal and interest converted under the Earn-Out Note and the Vendor Note.
The LOI also contains a 75-day exclusivity period and a termination fee and expense reimbursement payable to Halo in certain circumstances if the transaction with Halo is not completed.
Halo expects to complete the Planned Acquisition in the next 90 days. Completion of the Planned Acquisition is subject to the negotiation and entering into of the Definitive Agreement, the receipt of all applicable approvals (including the NEO Exchange) and the satisfaction or waiver of all closing conditions. There can be no assurance that the Planned Acquisition will be completed or the timing thereof.
Founded in 2017 by Alexandre Henri Lacarré, Phytocann Group Holdings is a leader in premium-branded CBD products in Switzerland . Starting from their 10,000 m grow facility in Switzerland , Phytocann solidified their strong position in the European market by completing three acquisitions in Switzerland in 2020, then two acquisitions in France and Luxembourg in 2021.
Phytocann is currently selling its products business to business in Switzerland , France , Belgium , the Netherlands , Luxembourg , Spain , and Italy , while selling business to consumers in Switzerland and France , with plans to expand business to consumer activities to additional European countries in 2022 and 2023. Phytocann's products include CBD oils, vapes, pollens, cosmetics, food & beverages. In addition, Phytocann's products (under the brands Easy Weed and Ivory) are currently being sold in over 1,000 retail locations across Switzerland and France . (See full product lineup here: https://www.phytocannswiss.com/shop/.)
In late 2021, Phytocann launched franchise stores, of which the entity holds partnership agreements with two companies in France and Cyprus . During the first quarter of 2022, five franchise stores have been opened, offering the full range of Phytocann's product portfolio. PhytoCann's management plans to open 35 additional shops across the world over the next two years.
The brand range of Phytocann unifies six brands and 260+ products. Following the development of strong distribution partnerships at the beginning of 2022. Phytocann has now focused its resources on strengthening e-commerce activities including seven websites. Phytocann has a partnership with French artist, Vincent Faudemer , who created a limited series of packaging for Ivory called Alien X which includes an NFT collection for customers. This creates a new dimension to Phytocann with the possibility to mix cannabis and Web3 revenues under the joint venture being incorporated in Bahamas owned 50% by PhytoCann and 50% by Faudemer.
Simultaneously, Phytocann is focused on improving the customer experience and footprint of luxury premium brands such as Ivory and Harvest Laboratoires in France and other countries while expanding into other consumer health and wellness categories with its cosmetic line named "Kanolia", which will be distributed by Pharmasimple into the European market in a short period of time, and lately to the Asian market.
The objective of Phytocann for the coming years is to maintain its actual positions and expand its sales to new countries by developing multiple partnerships and strategic acquisitions.
Phytocann video presentation: https://youtu.be/tMRtq0Pc0Hw
Phytocann interview with TECHNIKART: https://www.youtube.com/watch?v=mHmNXMdSB3M
Phytocann interview with BFM business: https://www.dailymotion.com/video/x80vq8b
Connect with Phytocann: Email | Website | LinkedIn | Instagram | Youtube
Halo is a leading, vertically integrated cannabis company focused on the west coast of the United States and operates other emerging businesses in CBD and non-psychotropic mushroom functional beverages. In its cannabis operations, Halo cultivates, extracts, manufactures, and distributes quality cannabis flower, oils, and concentrates and has sold hundreds of millions of grams of cannabis in the form of flower, pre-rolls, vape carts, edibles, and concentrates since inception. Halo sells a portfolio of branded cannabis products including its proprietary Hush™, Winberry Farms™, Williams Wonder Farms, and Budega™ brands, and under license agreements with Papa's Herb®, DNA Genetics, and FlowerShop*.
In Oregon , Halo has a combined 14 acres of owned and contracted outdoor and greenhouse cultivation. Halo also operates Food Concepts LLC, a master tenant of a 55,000 square foot indoor cannabis cultivation, processing, and wholesaling facility in Portland .
In California , Halo maintains licenses for extraction, manufacturing, and distribution. Halo has partnered with Green Matter and jointly purchased the Bar X Farm in Lake County and plans to develop up to 63 acres of cultivation, comprising one of the largest licensed single site grows in California . Halo has opened a dispensary in Los Angeles under the Budega™ brand in North Hollywood and plans to open two more in Hollywood , and Westwood in the second quarter of 2022.
Halo is also expanding into other consumer health and wellness categories expected to experience rapid growth in consumer demand, including functional supplements such as nootropic nutraceuticals. Halo has recently acquired H2C Beverages, a company focused on cannabinoids and non-psychotropic mushroom functional beverages and entered into a distribution and manufacturing agreement with SWAY Energy Corporation (formerly Elegance Brands Inc.), to propel the national distribution of beverages, dissolvable strips, capsules, and topical supplements under H2C and Halo's functional mushroom brand, Hushrooms. Halo has also entered into the LOI to acquire Phytocann, one of Europe's leading wellness CBD consumer packaged goods companies, that consists of vertically integrated operations from seed to sale, serving multiple market segments with value and premium brands. The Planned Acquisition will anchor Halo's strategy in which it plans to separate all of its non-THC companies, including Phytocann, into a new wholly owned subsidiary PIH.
Halo has acquired a range of software development assets, including CannPOS, Cannalift, CannaFeels, and a discrete sublingual dosing technology, Accudab. Halo intends to reorganize these entities (including their intellectual property and patent applications) into a subsidiary called Halo Tek Inc., and to complete a distribution of the shares of Halo Tek Inc. to shareholders on record, at a date to be determined.
Halo also operates three Kushbar retail cannabis stores located in Alberta, Canada .
Outside of North America , Halo is the largest shareholder of Akanda Corp. (NASDAQ: AKAN) currently owning 44% of the common shares. Akanda is an international medical cannabis and wellness platform company seeking to help people lead better lives through improved access to high quality and affordable products. Akanda is building a seed-to-patient supply chain, connecting patients in the UK and Europe with diverse products, including cannabis products cultivated at its competitively advantaged grow operation in the Kingdom of Lesotho and with other trusted third-party brands. Akanda's initial portfolio includes Bophelo Bioscience & Wellness, a GACP qualified cultivation campus in the Kingdom of Lesotho in Southern Africa , and CanMart, a UK-based fully licensed pharmaceutical importer and distributor which supplies pharmacies and clinics within the UK. In April 2022 , Akanda entered into a definitive agreement to acquire Holigen Limited, securing a cannabis sector leadership position in Europe , the Middle East and Africa (EMEA) with EU GMP market access.
For further information regarding Halo, see Halo's disclosure documents on SEDAR at www.sedar.com.
Connect with Halo Collective: Email | Website | LinkedIn | Twitter | Instagram
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