Flora Growth, a cannabis-focused consumer packaged goods provider and pharmaceutical distributor serving all 50 states and 28 countries with more than 20,000 points of distribution, has entered into an agreement to acquire TruHC pharma GmbH in an all-stock deal in exchange for 2,770,562 Flora common shares, valued at $6.4 million.
Flora said its wholly owned subsidiaries have been active in Germany since 2017, obtained the first medical cannabis license in Germany and are responsible for selling the first gram of medical cannabis in the country. With its acquisition of TruHC, Flora cements its position at the forefront of this German and European cannabis opportunity. The acquisition brings an already successful partnership between Flora and TruHC under the Flora brand. The combined company will use TruHC's German network and EU-GMP production facility.
Acquisition Rationale
- Effective today, adults over the age of 18 in Germany are to be allowed to possess up to 50 grams of cannabis for private consumption and grow up to three plants. Adults will be allowed to join nonprofit social clubs with a maximum of 500 members each starting July 1, 2024. Individuals will be allowed to buy up to 25 grams per day, or a maximum of 50 grams per month.
- With the largest population and greatest purchasing power in Europe, Germany boasts Europe's fastest growing cannabis market. With the following 2 phases of German legalization expected in the coming 12-18 months, Germany is expected to become the largest and most important federally legal adult use cannabis country globally, with expected market potential of over US$10 billion.
- The new Cannabis legislation is also expected to significantly increase the medical cannabis market in Germany, which is anticipated to witness a substantial growth in revenue, with projections estimating it to reach US$1 billion in 2024 and €7.7 billion by 2028 in addition to the recreational market.
Germany Leads the Way for Europe
- The new cannabis law positions Germany as the leading example for other European countries in relaxing restrictions for cannabis use and sale, with other countries such as the Netherlands, Switzerland and the Czech Republic announcing various forms of adult use legalization since Germany's announcement in 2021.
- With a current illicit EU cannabis market size of US$13 billion, and 448 million people living in EU countries only 4.8% of which are currently consuming cannabis, European market potential after legalization is projected to potentially reach 100 million European cannabis consumers, larger than the United States.
- With approximately 230,000 medical cannabis patients, Germany continues to lead the way in European medical cannabis as well. Following Germany are Italy, the Netherlands, Poland, Denmark and the Czech Republic, with the total number of cannabis patients in Europe is estimated to be 500,000 in 2023, and growth of around 500% is expected over the next five years.
TruHC is Purpose Built for this Moment
- Based in Hamburg, Germany, TruHC holds a GDP wholesale, and an EU-GMP processing and production license for medical cannabis. It also owns and operates an EU-GMP certified laboratory ready for instant cannabis analysis as required for the new Cannabis Social Clubs.
- The facility of TruHC is a flexible production space with EU-GMP certified modules that can be extended and customized for any production process from processing to extraction and enables a license extension for a future in country cultivation of medical cannabis and supply of cannabis dispensaries expected to be opened in 2025 during phase 3 of legalization. TruHC also holds a narcotic license with EU-GMP certified storage.
- TruHC's licenses were obtained with Germany's forthcoming legalization in mind. They allow TruHC to apply for new medical cannabis & cultivation licenses and become an official cannabis test lab for upcoming cannabis social clubs. It also enables extensive international import of seeds and flowers for future distribution in what is expected to become the largest federally legal recreational cannabis market in the world.
- TruHC's executive team, led by CEO Hendrik Knopp, brings proven leadership in international cannabis operations, manufacturing, facilities buildouts, and license acquisition, including winning the first tender for the cultivation of medical cannabis in Germany for Tilray (formerly Aphria). The TruHC team has held senior leadership positions at Nuuvera and Tilray (formerly Aphria) and made significant foundational private equity investments in leading U.S., Canadian and European cannabis operators.
"The acquisition of TruHC is expected to provide Flora with the runway it needs to maximize the benefits of Germany's cannabis legislation. We intend to touch on many verticals in the medical and recreational cannabis realms in Germany. We anticipate becoming a leader and at the forefront of the industry, which has the potential to spread to the rest of Europe. TruHC brings an EU-GMP facility and a management team that pioneered the cannabis industry in Germany to the Flora family. Together, we are excited to assume pack leadership in a sector poised for explosive growth," said Clifford Starke, Chief Executive Officer.
"This transaction marks the culmination of months of close cooperation and strategic planning. By joining forces, we have created a leader in German cannabis at a uniquely opportune time," said Hendrik Knopp, Chief Executive Officer of TruHC.
