Phytotech in $20m Canadian merger

Medical marijuana company Phytotech Medical has entered into an agreement to wholly acquire Canada-based MMJ Bioscience, in a deal worth about $20.7 million.

Under the terms of the merger, Phytotech will issue MMJ 51 million ordinary shares valued at 30.5 cents each upon settlement, with a further 17 million shares to be issued once certain milestones have been achieved.

MMJ is a holding and investment company which specialises in supply chain optimisation and development of medical cannabis.

In a statement, Phytotech said the merger of equals would position the two companies as a diversified, global, growth-oriented and vertically integrated medical cannabis company, from cultivation of medical cannabis to development and distribution of pharmaceutical and nutraceutical products.

“Phytotech and MMJ have complementary assets and strategic growth profiles, with a high potential for synergies,” the company said.

“The combined entity has little product overlap and well-timed expected cash inflows and outflows.”

The deal is subject to certain conditions being satisfied, including completion of due diligence by both companies and shareholder approval.

If the merger is successful, three MMJ nominees will join Phytotech’s board.

Phytotech managing director Boaz Wachtel said MMJ had significant potential to become a key medical cannabis producer within the near future in Canada.

“Partnering at this important stage provides significant benefits and synergies to both parties, and we expect substantial value uplift upon completion of each of the performance milestones structured into the deal,” Mr Wachtel said.

Completion of the acquisition has been scheduled for May 25.

Phytotech shares were 14.7 per cent higher at 35 cents per share at 1pm.