Flora Growth Corp. (NASDAQ: FLGC) (“Flora” or the “Company”),
a leading all-outdoor cultivator and manufacturer of global
cannabis products and brands, is pleased to announce it has signed
a Letter of Intent (“LOI”) to acquire 100% of the outstanding
equity interests of Switzerland based Koch & Gsell and its
wholly-owned hemp brand, Heimat.
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/a2fb7cde-a0ac-41f7-ae46-4863c26fb6fb
Under the Heimat brand, Koch & Gsell
manufactures and distributes a range of hemp products that contain
less then 1% THC, including pure hemp and blended hemp and tobacco
cigarettes, as well as bulk flower and teas in over 2,500 stores
across Switzerland. Heimat has become one of the leading brands in
the Swiss market for industrially manufactured hemp cigarettes.
Koch & Gsell distributes its Heimat pure hemp cigarettes and a
variety of Swiss grown hemp flowers in Luxembourg and Belgium,
expanding fast throughout Europe and standing at the doorstep to
Asian countries.
The Heimat brand, if acquired, will represent a
substantive addition to the Flora brand portfolio as a high growth
brand, with trailing twelve-month revenues of US$7.6M. Pursuant to
the terms of the LOI and subject to the definitive acquisition
agreement and approvals, upon the closing of the transaction, Flora
will also invest CHF 2 million (Swiss Francs), or approximately
US$2.2M, to rapidly grow the Heimat brand into new markets and to
strengthen Heimat’s position in the Swiss market. Further, by
leveraging Koch & Gsell’s existing distribution network, Flora
plans to introduce its brand portfolio, including Mind Naturals,
Mambe, and Almost Virgin, to the Swiss and European market.
Following consummation of the transaction, Koch
& Gsell will continue to be led by Founder and CEO, Roger Koch,
who has been responsible for growing the Heimat brand across
Switzerland and into new international markets in Europe and
Asia.
As part of the transaction, Flora anticipates
acquiring all of Koch & Gsell’s hemp, blended hemp and tobacco
cigarette manufacturing technology. The proprietary cigarette
manufacturing technology can produce over 40,000 packs of 20
cigarettes per day. The technology is patented in over 80
jurisdictions throughout the world, where Flora anticipates
bringing this technology into new markets to produce hemp,
cannabis, or blended cigarette products, utilizing Flora’s
high-quality, low-cost cannabis input.
“The proposed acquisition of Koch & Gsell is
a testament to our growth strategy. We are looking for partners
that complement our distribution, enhance our supply chain and
generate meaningful revenues in core markets that complement our
existing portfolio of products and our premium cannabis inputs,”
said Luis Merchan, CEO of Flora. “Not only are we attracted to Koch
& Gsell’s exceptional penetration in brick-and-mortar grocery
stores, but also their proprietary technology to create authentic
pure hemp and hemp & tobacco/herbal cigarettes at an industrial
scale, which we believe will be a major product category for the
global cannabis space in the years to come.”
About the Proposed
Transaction
Flora has signed an LOI to acquire 100% of the
outstanding equity interests of Koch & Gsell for consideration
of CHF 20 million (Swiss Francs), or approximately US$22.2M, to be
satisfied by the issuance of Flora common shares at a deemed price
of US$5.00 per share (the “Flora Share Price”). The closing of the
transaction will be subject to customary closing conditions,
including due diligence to the satisfaction of both parties and the
entering into of definitive agreements.
The Flora common shares to be issued as
consideration for the acquisition will be issued in equal quarterly
installments commencing on the closing of the transaction. If on
each quarterly issuance date, the common shares of Flora are
trading below the Flora Share Price, calculated using the 10-day
VWAP on NASDAQ (the “Updated Flora Share Price”), the sellers will
be entitled to receive the dollar amount difference between the
Flora Share Price and the Updated Flora Share Price, in cash or in
common shares of Flora, determined using the updated Flora Share
Price.
“We are very excited for the opportunity to join
the Flora portfolio of brands and will work with the Flora team to
continue expanding the presence of Heimat across Switzerland and
into the EU as well as entering other new global markets,” said
Roger Koch, founder of Koch & Gsell. “This deal may allow
Heimat to increase the profitability of our existing hemp lines,
speed up the industrial production of new hemp products we already
have developed as well as provide us access to Flora’s global
network of distribution points and other hemp derived products in
demand by our Swiss based retailers.”
About Koch & Gsell
Koch & Gsell (K&G) is a Swiss brand and
manufacturing company founded in 2015, that launched a new,
innovative tobacco-and-hemp cigarette, which caused a stir across
the world. In summer 2019, K&G further launched an industrially
manufactured pre-roll cigarette containing pure hemp and has taken
steps to protect the method they use to manufacture their hemp
products. K&G believes in the gentle yet compelling power of
Cannabidiol (CBD) as a relief for many of today’s lifestyle
diseases. Much is yet to be discovered, but the tremendous
potential of CBD as a powerful alternative to pharmaceuticals is
obvious and needs to be made available to customers across the
world.
About Flora Growth Corp.
Flora is a cannabis company that leverages
natural, cost-effective cultivation practices to supply cannabis
derivatives to its diverse business divisions of cosmetics, hemp
textiles, and food and beverage. As the operator of one of the
largest outdoor cultivation facilities, Flora strives to market a
higher-quality premium product at below market prices. By
prioritizing natural ingredients and value-chain sustainability
across its portfolio, Flora creates premium products that help
consumers restore and thrive. Visit www.floragrowth.ca or follow
@floragrowthcorp on social for more information.
Investor Relations Contact:Evan Veryard +1 416
571 9037evan.veryard@floragrowth.ca
Public Relations Contact:Cassandra Dowell +1
(858) 264-6600 flora@cmwmedia.com
Cautionary Statement Concerning Forward-Looking
Statements
This document contains forward-looking
statements. In addition, from time to time, we or our
representatives may make forward-looking statements orally or in
writing. We base these forward-looking statements on our
expectations and projections about future events, which we derive
from the information currently available to us. Such
forward-looking statements relate to future events or our future
performance, including: our financial performance and projections;
our ability to complete the acquisition of Koch & Gsell; the
impact of the acquisition of Koch & Gsell on our business; our
growth in revenue and earnings; and our business prospects and
opportunities. You can identify forward-looking statements by
those that are not historical in nature, particularly those that
use terminology such as “may,” “should,” “expects,” “anticipates,”
“contemplates,” “estimates,” “believes,” “plans,” “projected,”
“predicts,” “potential,” or “hopes” or the negative of these or
similar terms. In evaluating these forward-looking
statements, you should consider various factors, including: our
ability to change the direction of the Company; our ability to keep
pace with new technology and changing market needs; and the
competitive environment of our business. These and other
factors may cause our actual results to differ materially from any
forward-looking statement. Forward-looking statements are
only predictions. The forward-looking events discussed in
this document and other statements made from time to time by us or
our representatives may not occur, and actual events and results
may differ materially and are subject to risks, uncertainties and
assumptions about us. We undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result
of uncertainties and assumptions, or the forward-looking events
discussed in this document and other statements made from time to
time by us or our representatives not occurring, except as may be
required by applicable law.
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