Creso Pharma Ltd (ASX:CPH, OTCQB:COPHF) has entered into an asset purchase agreement with leading North American CBD player ImpACTIVE to acquire ImpACTIVE assets through a newly incorporated Creso subsidiary, Creso ImpACTIVE Ltd.
ImpACTIVE assets include eight products for sale as well as a growing development pipeline.
All products contain less than 0.3% THC on a dry weight basis significantly reducing global regulatory hurdles.
This is an important move for CPH as it allows the company to broaden its range of CBD-based products and gives it the opportunity to leverage ImpACTIVE’s progressing tender applications with major North American pharmacies including Walgreens and CVS pharmacies.
Walgreens is America’s second-largest pharmacy store chain operating 9,021 retail stores throughout the US, while CVS is America’s largest retail chain by number of locations and operates 9,896 retail outlets in 49 states.
Under the agreement, CPH will acquire the ImpACTIVE Assets for C$200,000 (A$216.454) payable in Creso shares, valued at A$0.11 per Creso share.
ImpACTIVE is a Canadian life sciences company focused on CBD-based products aimed at athletes and the sports market – a target market estimated to be worth US$22 billion (A$29.4 billion) worldwide and US$220 million in Canada by 2022.
The acquisition has a $40 million revenue target over five years.
“This acquisition marks the first phase of Creso Pharma’s efforts to enter into the US and I am excited to be working with ImpACTIVE to integrate them into the group,” CPH’s executive VP of North America, Will Lay, said.
“We have instituted aggressive sales targets, which is expected to lead to an increase in Creso Pharma’s top line and increased its market share across North America.
“This acquisition follows a significant legal and regulatory review which can now be relied upon to advance other CBD related acquisitions in the US; we are currently assessing multiple value accretive US M&A opportunities that will be based on a similar structure.
"Our model of acquisitions with high growth potential will be a key factor in the company’s US growth trajectory and I look forward to updating shareholders on further developments.”
Making an Impact
The acquisition of ImpACTIVE assets is an astute move by CPH and come ahead of its US listing.
CPH will have the opportunity to leverage ImpACTIVE’s distribution and sales channels to drive growth across its Swiss operations and should benefit from the immediate launch of online sales of ImpACTIVE products. Discussions with potential retail groups are already well progressed in this matter.
CPH is exploring a number of additional opportunities, including cross-promotion of existing CBD products through ImpACTIVE’s brand ambassadors and discussions with potential stockists.
The company expects sales and additional partnerships to materialise in the coming months.
ImpACTIVE was founded in 2019 by current and former high-profile athletes seeking to provide alternative treatment routes to the athletic community.
The Canadian life sciences company has developed a range of CBD based products, designed to reduce muscle and joint inflammation without the use of heavy narcotics or prescription pharmaceuticals.
Several well-known brand ambassadors promote its products, which are gaining traction amongst consumers in North America.
The agreement follows a Letter of Intent between CPH and ImpACTIVE, allowing ImpACTIVE to distribute CPH’s hemp CBD-based human health products, CannaDOL and cannaQIX®, in Canada and the US.
As part of the LOI, CPH obtained the rights to distribute ImpACTIVE’s CBD roller application in Switzerland and Europe.
As part of the agreement, CPH ImpACTIVE’s topical creams and roll-on products to its growing range.
Products include:
- ImpACTIVE Pro-ReLEAF CBD Roll-On
- Pro-ReLEAF Hybrid Roll-On
- Pro-ReLEAF CBD Cream
- XPro-ReLEAF CBD Cream
- Pro-ReLEAF Hybrid Cream
- XPro-ReLEAF Hybrid Cream.
Creso Pharma is pursuing purchase orders for the new products through its key wholesalers in Switzerland and 2,100 distribution points through pharmacy networks, drugstores and specialised retailers.
“This agreement is a major development for the company. The agreement is at a low cost to Creso Pharma, with significant potential upside based on the performance of ImpACTIVE management,” CPH non-executive chairman Adam Blumenthal noted.
“We expect that ImpACTIVE’s range of innovative products and brand ambassadors will provide Creso Pharma with direct access to an emerging subsection of the global CBD market. The group also has established relationships with major US retail groups, which is expected to provide leverage for Creso Pharma as it seeks to grow sales of its own hemp-based CBD products.
“Further, this agreement highlights the company’s ongoing commitment to entering the US market ahead of its proposed dual listing. We look forward to working with ImpACTIVE’s team to scale up sales and progress cross-selling opportunities, which is anticipated to be to the benefit of our shareholders.”
Everybody wins
“We are very excited to join the Creso Pharma group of companies. Creso has an established global footprint, existing sales channels and operations which will give us the framework to potentially significantly scale our own business to meet the revenue targets set,” ImpACTIVE co-founder and CEO Brett Ayers said.
“With the help of the board and management team, we are very confident that we can achieve this sales growth, as well as pursue other international expansion opportunities. We have a number of opportunities that are expected to materialise in the near term.”
These opportunities are designed to help the companies meet their performance targets.