On March 10, 2021 EMMAC Life Sciences Group, Europe’s largest independent cannabis company, reported that it is has signed a definitive agreement to be acquired by Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF) ("Curaleaf" or the "Company"), a leading U.S. provider of consumer products in cannabis, for a base consideration of approximately US$285 million to be paid in 85%/15% Curalfeaf shares and cash (Press release, EMMAC Life Sciences, MAR 10, 2021, View Source [SID1234576609]). Contingent consideration of up to $57 million will be paid in Curaleaf shares and cash in the same ratio based upon the successful achievement of performance milestones. The proposed transaction provides Curaleaf with a developed platform for entry into the European cannabis market.
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As Europe’s largest vertically integrated independent cannabis company, EMMAC’s platform brings cultivation, EU-GMP processing, distribution, and R&D operations across several key European medical cannabis markets, including the United Kingdom, Germany, Italy, Spain and Portugal. EMMAC also has an operational presence and partnerships in European Union countries that are enacting new medical cannabis access programs. EMMAC’s Portugal based cultivation facility is an industry leader in cannabis flower production cost.
Boris Jordan, Curaleaf Executive Chairman, stated, "Curaleaf’s acquisition of EMMAC, announced today, provides an advanced base to reach scale within the nascent European cannabis market and transform Curaleaf into a truly international cannabis consumer packaged goods company. The consumer and political liberalization trends around cannabis that are sweeping the U.S. are also increasingly taking hold in Europe. Curaleaf will seek to leverage our branded cannabis consumer packaged goods strategy across Europe, a market which provides for cross-border cannabis distribution. The European cannabis market has the potential to exceed the U.S. cannabis market over the long-term and will help fuel our growth for years to come."
Antonio Costanzo, Chief Executive Officer of EMMAC, said, "Curaleaf’s acquisition of EMMAC is not only a significant milestone for EMMAC, but for the European cannabis market as a whole. As part of Curaleaf, a well-capitalized leader of the U.S. cannabis market, EMMAC is poised to exploit the rapid pace of growth of the European market, driven by regulatory change and the increasing demand for access to premium quality cannabis products. The combination of Curaleaf and EMMAC creates a global platform to address these large new opportunities across Europe. With EMMAC’s science-led approach, wealth of local market experience, as well as our network of supply and distribution partnerships throughout Europe, we are now uniquely positioned to reinforce our place as one of Europe’s leaders in the production and supply of medical cannabis, wellness CBD, hemp and other derivative products."
Transaction Terms & Approvals
Curaleaf will acquire EMMAC for base consideration of £0.50 per share, comprised of approximately GBP£35 million in cash, approximately 16.774 million subordinate voting shares of Curaleaf (based on the exchange ratio of Curaleaf share for each EMMAC share agreed by the parties). At yesterday’s Curaleaf closing share price on the CSE, the base consideration is valued at $285 million2. An additional US$57 million3 consideration will be paid subject to performance-based earn-outs. Post-transaction, the former shareholders of EMMAC will have approximately 3% pro forma ownership of Curaleaf on a fully-diluted basis, before factoring in the performance-based earn-outs. The Curaleaf share consideration will be subject to a statutory four-month hold period as well as a lock-up agreement with each recipient restricting trading of the share received, with release of 5% from such restrictions at the end of each calendar quarter following the closing. The proposed transaction is expected to close early in the second quarter of 2021, subject to customary closing conditions and regulatory approval. The transaction has been unanimously approved by the boards of directors of both EMMAC and Curaleaf, with Mr. Boris Jordan abstaining from the voting.
Transaction Advisors
Stikeman Elliott LLP and Memery Crystal LLP acted as legal advisors to Curaleaf. Eight Capital acted as financial advisors and provided a fairness opinion to the Special Committee. Canaccord Genuity Group acted as financial advisor and provided a fairness opinion to EMMAC, and Norton Rose Fulbright acted as legal advisor to EMMAC. EMMAC’s European legal team was led by Hill Dickinson LLP in the United Kingdom.