This should come as no surprise given the recent turn of the tides for the US hemp industry. The 2018 Farm Bill effectively restored industrial hemp’s legal status for the first time in America since World War II. This bill removed hemp out from under the thumb of the Controlled Substances Act of 1970 (CSA), paving the way for exponential growth. In fact, some estimates place the hemp-derived CBD market alone to reach $1.3 billion by 2022, and the hemp industry as a whole to reach a whopping $20 billion by the year 2024. This has both investors and companies such as Next Green Wave very excited.
Nepture Wellness Solutions (NWS)
NWS (Nepture Wellness Solutions), a privately-ran Canadian nutrition company just purchased one of the largest hemp extractors in the US located in North Carolina for $150M, marking another powerful move by Canadian big-cannabis companies seeking to expand to the US market. The hemp extractor company that was sold is Sugarleaf Labs of Conover, a hemp-extraction company located in the state of North Carolina. The deal was settled at $150M USD, however, under multiple conditions. This is another move by Canadian biotech companies seeking to establish a stronghold in a 300M-strong market.
SugarLeaf Labs has one of the largest extraction facilities in the US, possessing a processing capacity of 1,5000,000 KG of marijuana. SugarLeaf Labs is also an established company with connections to many prominent US retailers and pharmaceutical companies.
NWS, the company responsible for the takeover has an HQ near Montreal, Quebec and specializes in the production of natural oil supplements for the body such as fish-oil and cannabis oil. This is one of their major purchases after they recently raised capital for new investments. The NC base will likely be their main US HQ, related to all cannabis-oil production.
Leadership at NWS was concerned at the fact that they don't have a strong supply-chain presence on the US market, and this deal signifies a milestone for the company because it will solidify NWS’s presence on US soil.
The CEO of NWS announced, "Now is the right time for NWS to buy a strong share in the US marketplace, and set the foundation for a complete supply chain in the US".
NWS's stock prices started soaring after the acquisition decision was announced, and their share prices increased within hours. The company trades on both the US NASDAQ and the Canadian Toronto Stock Exchange. Neptune is listed on the NASDAQ under the trading name “NEPT”.
Stages of the Deal
The company did not pay out a full $150M in cash immediately, as they're still in the early stages of capital-raising and actively seeking out capital from investors. However, they did agree to split the acquisition deal in a 3-year guarantee plan, and the complete payout will depend on the performance of Sugarleaf Labs of Conover, which will likely have to increase performance in order to earn a full payout, once its production capabilities are maximized and the company receives new Canadian supervision.
The deal that NWS signed with Sugarleaf Labs will unfold in the following 3 stages:
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Stage 1) NWS will immediately pay out a guaranteed $12M in cash.
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Stage 2) NWS will pay the company $6M more in the form of NWS shares.
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Stage 3) NWS will guarantee to pay the remainder $132M via cash and stock if the company manages to perform and produce enough profits over a 3-year window.
Payout will depend on the performance of Sugarleaf Labs over a 3-year window, and the company will receive an immediate advance payment of $18M.
The Canadian company is acquiring Sugarleaf Labs on a debt-free basis, in order to progressively increase its output and guarantee payment for the owners and employees of Sugarleaf.
Statements from their Respective CEOs
The CEO's of both companies issued statements claiming mutual excitement for the deal. Jim Hamilton, the CEO of NWS said: "This is the right time to establish a supply chain in the US, as the cannabis industry is growing exponentially in North America and we want to ramp up our current production". He added, "Sugarleaf has a massive output capacity, and this is what we need in order to increase the production of high-quality extracts and develop stronger supplier relationships, combined with our existing relationships. This will help us create stronger value for US brands and deliver higher-quality products to our customers". NWS aims to become a leader in the extraction of cannabis and cannabis-related health products. He completed his statement by formally welcoming Sugarleaf to the NWS team.
SugarLeaf's CEO Peter Galloway said, "We are very excited to combine forces with NWS, and accelerate our common growth and development".
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