Charlotte’s Web Holdings, Inc (TSX: CWEB) has entered into a definitive agreement with Abacus Health Products Inc (CSE: ABCS), following Charlotte’s Web’s previous proposal to purchase all of Abacus’s outstanding and issued subordinate voting shares, for a total consideration of $99 million.
As per the terms of the agreement, all outstanding and issued Abacus shares will be purchased by Charlotte’s Web, where 0.85 of each Charlotte’s Web share will be equal to one Abacus share. This ratio is established on Charlotte’s Web’s and Abacus’s 10-day Volume Weighted Average Price, which is at $5.17 and $4.39, respectively; this is a 38% premium for Abacus shareholders. Therefore, the entire purchase is worth $99 million, with Abacus shareholders soon to be holding 19.2 million Charlotte’s Web shares.
The Board of Directors from both Abacus and Charlotte’s Web have approved the acquisition, as well as those shareholders which hold 20% of Abacus shares also all voted in favor of the acquisition. In addition, there will be a new employment agreement following the transaction, which has been issued by the CEO of Abacus since he holds 4.3% outstanding and issued shares of Abacus. The shares will be subject to a lock-up period of 15 months where he can only sell Charlotte’s Web shares in increments of six months.
In addition, the transaction is also subject to a termination fee of $4 million, which Abacus would be responsible for if the company was to terminate the agreement. Abacus also subject to a non-solicitation agreement, which means the company cannot seek other buyers which may be superior to Charlotte’s Web acquisition proposal.
Furthermore, prior to the transaction, a special meeting is to be held for all Abacus shareholders who will vote on whether or not the transaction will be honored. The Board of Directors have suggested that the shareholders vote in favor, as the transaction has been deemed financially fair by a third party. It is anticipated that the transaction will be completed sometime in the second quarter of 2020, given that all approvals and conditions are met.
This transaction will see Charlotte’s Web gaining a significant portion of market share, in addition to paving the way for economies of scale. Abacus currently has 12,000 retail channels which will be added to Charlotte’s Web’s 11,000 retail channels, as well as Abacus’s 16,500-strong network of medical practitioners.
Abacus is a cannabis company headquartered in Toronto, and is focused on the development of over-the-counter cannabinoid topical medications. The company’s products are available in throughout the United States, and are aimed at the therapeutic skincare and topical pain relief markets.
Charlotte’s Web Holdings Inc focuses on the cultivation, production, and distribution of CBD products, and is currently trading at $4.96 on the TSX.
Information for this briefing was found via Sedar and Charlotte’s Web Holdings Inc. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.