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Announced today, Perth-based medicinal cannabis company Little Green Pharma (ASX: LGP) is acquiring long-time distribution partner Health House in an all-cash deal for $1.25 million.
The deal is part of LGP’s strategy to strengthen its presence in the Australian market while Health House continues to act as a distribution partner for other medicinal cannabis brands. It is also expected to strengthen LGP’s profit by absorbing approximately $7.5 million in annualised revenue.
Under the agreement, Health House Australia has given LGP an exclusivity period until 31 January 2025 to complete due diligence and finalise a binding agreement. LGP will pay Health House Australia a non-refundable deposit of $50,000 and a refundable deposit of $25,000, with the amount to be applied to the final acquisition price.
A cashflow breakeven business, Health House is a national medicinal cannabis distribution business in Australia and has been a distribution partner of LGP since 2019. According to ASIC documents, Health House Australia is owned by Clinicann - a subsidiary of UK-based Health House Holdings Limited.
"This proposed acquisition represents a key milestone in LGP's strategy to enhance our position as a market leader in the Australian medicinal cannabis sector," said LGP CEO Paul Long.
"By integrating Health House’s operations with our existing capabilities, we can unlock significant synergies and deliver even greater value to our patients and stakeholders.
"Health House’s established distribution network and strong market presence perfectly complement LGP’s cultivation and production expertise. This partnership marks an important step towards increasing our vertical integration in support of sustainable growth as we continue to work alongside our existing key distribution partners across Australia."
Founded in 2016 by Fleta Solomon, Little Green Pharma Group is a medicinal cannabis and psychedelics business with three global production sites that allow it to manufacture its own-branded and white-label ranges of medicinal cannabis and psychedelic products. Its facilities include a Danish glasshouse facility, a West Australian indoor craft production facility, and a combined psychedelics clinic, head office and therapeutic goods manufacturing facility in Western Australia.
LGP's financial results for the half-year ended 30 September 2024 show a 36.8 per cent increase in revenue from ordinary activities year-on-year, reaching $17.5 million compared to $12.8 million. This growth was driven by higher domestic and international sales of its flower, oil and vaporiser products. However, losses increased by 58 per cent to $3.4 million compared to a previous figure of $2.1 million.
The company reported that adjusted EBITDA increased year-on-year to $266,000, up from a previous loss of $511,000, reflecting the revenue growth and early indications of economies of scale.
LGP also achieved a positive operating cash inflow of $738,000, marking a significant improvement from the $1.8 million cash outflow reported in the previous financial year.
The company says it will continue its due diligence on Health House and anticipates finalising a binding share purchase agreement within the exclusivity period.
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