Elixinol Wellness Ltd (ASX:EXL, OTCQB:ELLXF) is on its way to becoming a premium hemp and plant-based health and wellness company with access to the largest hemp farmer network in Australia through the proposed acquisition of The Sustainable Nutrition Group Ltd (TSN).
To do this, the global hemp-based manufacturer and marketer has entered into schemes of arrangement to acquire 100% of TSN’s shares and effect an exchange of options.
The acquisition will increase the group’s distribution point from 2,300 to 4,100 locations in Australia and result in annual cost savings and identified synergies of up to $6.6 million.
Following the merger, the group will own and operate brands across four key verticals: plant-based food and nutrition, hemp-based nutraceuticals such as CBD, pet nutritional supplements and skin health.
Strong fit
Elixinol Wellness’ global chief executive officer Ron Dufficy said: "Having evaluated a number of external businesses through our strategic review period, we have completed due diligence and are confident that The Sustainable Nutrition Group is a strong fit for Elixinol Wellness.
“We are fully aligned in our vision to build a leading global plant-based food, health and wellness company and have identified many ways in which we can leverage our infrastructure and highly complementary product set in order to realise this vision.
“We are particularly excited about the scale that we will achieve with this transaction. Increasing the size and scale of both businesses enables access to economies of scale and provides cost efficiencies to support the delivery of our profitability goals.
“The combined group will benefit from potential annualised cost savings of up to $4.3 million, including potential savings identified from the strategic reviews undertaken by both companies, plus new transaction potential synergies of up to $2.3 million, representing total potential savings of up to $6.6 million, which are expected to be relatively easy to realise owing to the nature of our like business models.
“Having worked closely together throughout a comprehensive due diligence process we have very much enjoyed getting to know the TSN team. We look forward to combining our extensive industry expertise to create an industry-leading team.”
How will it work?
Elixinol Wellness will issue 1.1225 shares and 1.1225 options in exchange for one TSN share and one TSN option, respectively.
To help TSN refinance its existing debt, cover the costs to undertake the schemes, as well as to have access to working capital during the merger process, Elixinol Wellness will provide it with a loan of up to $2 million.
Current TSN shareholders will hold 30% of the merged group after the implementation of the schemes, which is subject to customary conditions, including approvals by share and option holders, the Court and regulators.
The schemes are expected to be implemented by March next year provided all relevant conditions and approvals are secured.
Leveraging growing consumer sector
Elixinol Wellness is a global leader in the hemp industry, innovating, marketing and selling hemp-derived nutraceutical, cosmetic and food products.
It operates in markets across North America, the UK, Europe and Australia, and is expanding distribution of Elixinol-branded hemp-derived products through reputable distributors across the rest of the world as key markets open.
TSN engages across the value chain encompassing seed selection, farming, processing, packaging, distribution and sales of bulk, food service and retail products.
It produces, manufactures and distributes a range of sustainable and plant-based nutrition brands, including hemp products, under the Mt Elephant, Australian Primary Hemp, Field Day and The Australian Superfood Co brands to retail, wholesale, e-commerce and white label customers in Australia.
The combined group will be well-positioned to leverage on the mainstream shift towards sustainable nutritional products and capture a slice of the global plant-based protein market, which is expected to reach US$17.5 billion in 2027.