Auxly Cannabis Group Inc (CVE:XLY, OTCQX:CBWTF) revealed that it had formally closed the previously announced Inverell S.A. acquisition.
Inverell is a federally licensed cannabis operator based in Montevideo, Uruguay led by scientist Dr Raúl Urbina. The firm has now received the green light from the government body SENACLAFT, which oversees foreign direct investments into the South American country for the acquisition of 80% of Inverell, it said.
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The latter is a large-scale outdoor producer of hemp plants for CBD extraction operating on an initial footprint of around 300 hectares.
It has recently started the planting of feminized seeds on 150 hectares (around 16.1 million square feet) which it expects to complete by early December and harvest in mid-April of 2019.
Auxly's ownership of Inverell gives it a cornerstone asset through which to effectively exploit emerging international distribution channels, including through Auxly's strategic partnership with ICC International Cannabis Corporation Inc (CSE: WRLD) which provides gives access to 16 markets through a network of 35,000 pharmacies.
Auxly has also applied for a permit to import proprietary cannabis genetics from Inverell to use in its Canadian operations.
Upon receipt of the permit, the firm will be able to import proprietary high CBD yielding genetics from Uruguay created through the breeding program at Inverell.
“I couldn't be more excited to announce the closing of the Inverell transaction," said Hugo Alves, the president of Auxly.
"Not only is Auxly acquiring an incredible project, but we are welcoming one of the world's foremost experts in large-scale outdoor cultivation and the extraction of high value molecules from plants into the Auxly family."
He added: "Through Inverell, Auxly is perfectly poised to play a leading role in the global CBD economy and establish itself as a leading manufacturer of value-added cannabinoid-based products for domestic and international markets.
"Our ability to exercise strict QA/QC controls along every point of the supply chain from cultivation to extraction to product manufacturing, all within jurisdictions where cannabis is federally legal, ensures that we will be able to meet the quality assurance and supply chain demands of increasingly sophisticated and institutional purchasers."
Terms of the transaction include the payment by Auxly of US$2 million in cash on the date of closing, and US$$3,562,500 which will be paid from issuing over 1.56 million shares at C$2.28 on closing.
In connection with the deal, Auxly has agreed to extend to Inverell up to a further US$5 million via a secured loan repayable through cash flows generated by Inverell’s cultivation operations.
Shares added 1.08% to $0.94 each.
Reporting by Giles Gwinnett