Little Green Pharma Expands with Health House Acquisition
LGP (LGP) Share Update December 2024 Thursday 19th
Little Green Pharma to Acquire Health House Distribution Business
Little Green Pharma Ltd (ASX: LGP) has announced its intent to acquire Health House Australia Pty Ltd, a strategic move aimed at enhancing its distribution capabilities and market presence in the medicinal cannabis sector.
Instant Summary:
- LGP to acquire Health House for $1.25 million.
- Acquisition aligns with LGP's strategy for vertical integration.
- Exclusivity period until 31 January 2025 for due diligence.
- Health House generates approximately $7.5 million in annual revenue.
Acquisition Details
Little Green Pharma Ltd, a prominent player in the medicinal cannabis industry, has entered into a binding letter of intent with Health House Australia Pty Ltd. The agreement grants LGP exclusive rights to acquire Health House, a move that aligns with LGP's broader strategy to capitalize on current market conditions by acquiring sustainable businesses at attractive valuations.
The acquisition price is set at $1.25 million for a business that is cashflow breakeven and generates approximately $7.5 million in annual revenue. This transaction is expected to deliver significant operational synergies and enhance LGP's vertical integration capabilities.
Terms of the Agreement
Under the terms of the agreement, LGP has been granted an exclusivity period until 31 January 2025 to complete due diligence and finalize the acquisition terms. The purchase price is calculated on a cash-free, debt-free basis, with adjustments for net payables and receivables at closing.
LGP will pay a non-refundable deposit of $50,000 and a refundable deposit of $25,000, both of which will be applied to the final acquisition price at closing. This strategic acquisition aims to expand LGP's operational flexibility and strengthen its leadership position in the Australian medicinal cannabis sector.
Strategic Implications
Health House has been a trusted distribution partner of LGP since 2019, operating a nationally focused medicinal cannabis distribution business across Australia. The acquisition is expected to bolster LGP's distribution network and enhance its ability to deliver high-quality medicinal cannabis products to a broader market.
This acquisition is likely to positively impact LGP's stock by enhancing its operational capabilities and market reach. The integration of Health House's distribution network is expected to create synergies that could improve LGP's profitability and competitive position in the medicinal cannabis sector.
Investor Reaction:
Analysts are likely to view this acquisition favorably, given the strategic fit and potential for operational synergies. The acquisition is expected to strengthen LGP's market position and provide a platform for future growth.
Conclusion:
Investors should monitor the progress of the acquisition and consider the potential long-term benefits of LGP's expanded distribution capabilities. This strategic move underscores LGP's commitment to growth and leadership in the medicinal cannabis industry.