Ecofibre Limited (ASX:EOF) has entered into a conditional agreement to sell its hemp food and animal products business, Ananda Food Pty Ltd, to a wholly owned subsidiary of Elixinol Wellness Limited (ASX: EXL).
Ananda Food claims to be Australia’s largest hemp producer and leader in both growing and processing hemp and curating genetics.
So why is Ecofibre selling it?
“Ananda Food is currently too small to deliver near term cash profits from its hemp food and pet products business,” said Ecofibre Group Chairman Vanessa Wallace. “This sale will deliver a good outcome for Ecofibre’s shareholders and enable a sustainable future for the combined business.”
Funds from the sale of Ananda Food will be used as additional working capital for Ecofibre.
Beyond being a producer of hemp seeds, protein and oil, Ananda has also been dabbling in utilising hemp by-products. The company developed and launched a home branded cat litter for Woolworths called “Smitten” last year.
As well as providing Elixinol the capability to produce all hemp products in-house, Ananda Food will bring new hemp seed IP to Elixinol.
The deal, worth $3 million, is comprised of two elements. One is a $2.0 million cash payable on completion, which is expected to occur in late March 2024. The second is a $1.0 million earnout subject to the value of cat litter product sales between 1 April 2024 and 30 June 2025.
To fund the acquisition, Elixinol is undertaking a fully underwritten non-renounceable entitlement offer to raise approximately $3.16 million via the issue of approximately 632 million shares. While the funds raised will be used primarily to support the acquisition, it will also be utilised for marketing spend and general working capital purposes.
“The acquisition of Ananda Food will strengthen and broaden EXL’s hemp ingredients portfolio,” said Elixinol Wellness Group CEO and Managing Director Ron Dufficy. “EXL will become one of the largest suppliers of hemp ingredients in Australia across both branded and private label products.”
Elixinol Wellness is a vertically integrated business with brands including Hemp Foods Australia, Mt Elephant and Field Day. It also supplies Australian natives and “superfood” ingredients to white label customers through The Australian Superfood Co.
The company also sells Elixinol branded hemp and other plant-derived nutraceutical and skincare products in the Americas. It has a presence in UK, Japan, Brazil, Mexico and South Africa markets through exclusive distribution and/or trademark and know-how licensing agreements.
