Creso Pharma Ltd (ASX:CPH, OTCQB:COPHF) has signed a non-binding term sheet for the acquisition of Health House International (HHI) Ltd, an international pharmaceutical distributor specialising in the distribution of medicinal cannabis-based products in Australasia, the UK and Europe.
The term sheet is conditional on the completion of due diligence on Health House, after which the two companies will enter a formal scheme implementation deed, among other conditions.
Creso has highlighted HHI’s healthy balance sheet as one of the core reasons for the purchase – Health House recorded A$4.26 million in cash receipts in the third quarter of the 2022 financial year, compared to Creso’s first quarter revenue of A$4.8 million in the same period.
On a pro-forma basis, the acquisition of HHI would have potentially increased the CPH group revenue by 91% in the first quarter of the 2022 financial year, even without taking into account the improved global marketing and distribution capabilities the company could bring to the group.
Acquisition to unlock new markets
“The proposed acquisition of Health House has a number of potential benefits for Creso Pharma,” Creso Pharma group CEO and managing director William Lay said.
“Subject to a formal scheme implementation deed being executed, implementation of the scheme would result in Creso Pharma significantly strengthening its global distribution capabilities and unlocking a number of new markets across the UK, Europe and Australia.
“The company intends to undertake due diligence on Health House’s operations immediately and explore the potential to leverage the group’s existing relationships for Creso Pharma’s own product ranges.
“Further, the company will investigate other potential opportunities including HHI’s existing EU-GMP product manufacturing capabilities and how these can further benefit Mernova, SSH and Creso Switzerland as we push to establish a presence in Europe and the UK.
“We look forward to progressing work towards implementation of the scheme and will provide ongoing updates as due diligence requirements are met and additional opportunities materialise.”
Should Creso decide to complete the acquisition, the company has stated it will focus first on reducing costs for HHI to accelerate profitability, including the removal of corporate overheads and the reduction of headcount, sales, manufacturing and distribution costs.
The company will also look to leverage cross-selling opportunities with its own products through HHI’s distribution network and vice versa.