- Flora Growth is a cannabis cultivator and international brand developer with a strong base of operations at its licensed facility in northern Colombia
- Flora recently announced its plans to acquire multi-national operator Franchise Global Health (“FGH”), the latest of its strategic acquisitions designed to boost revenues and expand Flora’s international footprint
- FGH is focused on the German market, where its subsidiary was the first company to sell cannabis
- Germany is in turn expected to provide the companies a launching pad for success in Europe, where opportunity is defined by the fact that currently Germany provides 75 to 80 percent of Europe’s cannabis sales
- Flora has already reported cooperative agreements to increase its product distribution pipeline to Switzerland and the Czech Republic
Cannabis cultivator, brand manufacturer and global distributor Flora Growth (NASDAQ: FLGC) is aiming for continued revenue boosts through strategic acquisitions, announcing Oct. 24 that it will obtain the issued and outstanding shares of multi-national operator Franchise Global Health Inc. as the company positions itself to expand its wholesale cannabis sales and brand distribution operations in Europe.
The company stated in its news release that it expects the acquisition to result in at least $3 million of annualized cost synergies within the first year as they eliminate repetitive costs between the two companies (https://ibn.fm/NSGY6). Both companies expect to announce their Q3 financial reports in the near future and while the announcement doesn’t otherwise provide projections of their future performance, Flora’s acquisition strategy has injected significant revenue in recent months, such as when it announced that H1 revenues grew 604 percent YOY to about $15 million (https://ibn.fm/G9uQZ).
Flora and Franchise Global Health (stylized FGH) expect to close the all-stock deal in December following presentation of the agreement to FGH shareholders for a vote.
“At Flora, we believe that cannabis will dramatically improve the wellbeing of consumers around the globe and that it will become an international trade. Our company exists today to capitalize on that opportunity,” CEO Luis Merchan stated in a video interview about the agreement (https://ibn.fm/JfhPz).
“Together we have a very sustainable business,” FGH CEO Clifford Starke stated during the interview. “We have extremely strong revenue performance without executing on really what we’re trying to do, which is become a fully integrated medical cannabis company of high THC products.”
One of Flora Growth’s strategic acquisitions earlier this year was consumer wellness brand JustCBD, which increased Flora’s profile to more than half a million wellness consumers and 14,000 points of distribution in the United States at the time.
JustCBD’s 79 products registered with the UK’s novel foods standards agency are expected to also help the company expand its operational footprint in Europe and the United Kingdom where CBD is still nascent. Within the United States the company’s NASDAQ listing precludes Flora from participating in the THC (traditional tetrahydrocannabinol cannabis) market however Flora does provide THC and CBD flower and derivatives to international markets thanks to its strong position with a licensed cultivation, extraction and isolation facility in northern Colombia’s fertile climate.
FGH was the first company to sell cannabis in Germany, and the companies perceive Germany as they key to entering the rest of Europe.
“Our full focus is on Germany,” Starke said. “Our strong position is on the distribution front. … Which, if this cannabis market is going to come to life, which we all believe so, … we’re extremely well positioned to go past Germany into the rest of Europe. It’s very important to understand that 75 to 80 percent of the sales in Europe are accounted in Germany.”
Starke added that the acquisition will fill FGH’s strongest need — supply of cannabis. Given Flora’s Colombian cultivation and cost advantages and FGH’s existing relationships with more than 1,200 pharmacies, the companies believe they are well suited to lead the way in medical cannabis in Germany.
“When we started up in Germany and going into 2019, we were selling 60, 70, 80 kgs a month quite easily, and unfortunately supply constraints really limited us and now we’re back on path to regain market share,” he said.
For more information, visit the company’s website at www.FloraGrowth.com.
NOTE TO INVESTORS: The latest news and updates relating to FLGC are available in the company’s newsroom at https://ibn.fm/FLGC
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