TORONTO, ONTARIO – June 14, 2021 — Flora Growth Corp. (NASDAQ: FLGC) (“Flora” or the “Company”), a leading all-outdoor cultivator and manufacturer of global cannabis products and brands, is pleased to announce it has signed a Letter of Intent (“LOI”) to acquire 100% of the outstanding equity interests of Switzerland based Koch & Gsell and its wholly-owned hemp brand, Heimat.
Heimat – Koch & Gsell’s Leading Brand
Under the Heimat brand, Koch & Gsell manufactures and distributes a range of hemp products that contain less then 1% THC, including pure hemp and blended hemp and tobacco cigarettes, as well as bulk flower and teas in over 2,500 stores across Switzerland. Heimat has become one of the leading brands in the Swiss market for industrially manufactured hemp cigarettes. Koch & Gsell distributes its Heimat pure hemp cigarettes and a variety of Swiss grown hemp flowers in Luxembourg and Belgium, expanding fast throughout Europe and standing at the doorstep to Asian countries.
The Heimat brand, if acquired, will represent a substantive addition to the Flora brand portfolio as a high growth brand, with trailing twelve-month revenues of US$7.6M. Pursuant to the terms of the LOI and subject to the definitive acquisition agreement and approvals, upon the closing of the transaction, Flora will also invest CHF 2 million (Swiss Francs), or approximately US$2.2M, to rapidly grow the Heimat brand into new markets and to strengthen Heimat’s position in the Swiss market. Further, by leveraging Koch & Gsell’s existing distribution network, Flora plans to introduce its brand portfolio, including Mind Naturals, Mambe, and Almost Virgin, to the Swiss and European market.
Following consummation of the transaction, Koch & Gsell will continue to be led by Founder and CEO, Roger Koch, who has been responsible for growing the Heimat brand across Switzerland and into new international markets in Europe and Asia.
As part of the transaction, Flora anticipates acquiring all of Koch & Gsell’s hemp, blended hemp and tobacco cigarette manufacturing technology. The proprietary cigarette manufacturing technology can produce over 40,000 packs of 20 cigarettes per day. The technology is patented in over 80 jurisdictions throughout the world, where Flora anticipates bringing this technology into new markets to produce hemp, cannabis, or blended cigarette products, utilizing Flora’s high-quality, low-cost cannabis input.
“The proposed acquisition of Koch & Gsell is a testament to our growth strategy. We are looking for partners that complement our distribution, enhance our supply chain and generate meaningful revenues in core markets that complement our existing portfolio of products and our premium cannabis inputs,” said Luis Merchan, CEO of Flora. “Not only are we attracted to Koch & Gsell’s exceptional penetration in brick-and-mortar grocery stores, but also their proprietary technology to create authentic pure hemp and hemp & tobacco/herbal cigarettes at an industrial scale, which we believe will be a major product category for the global cannabis space in the years to come.”
About the Proposed Transaction
Flora has signed an LOI to acquire 100% of the outstanding equity interests of Koch & Gsell for consideration of CHF 20 million (Swiss Francs), or approximately US$22.2M, to be satisfied by the issuance of Flora common shares at a deemed price of US$5.00 per share (the “Flora Share Price”). The closing of the transaction will be subject to customary closing conditions, including due diligence to the satisfaction of both parties and the entering into of definitive agreements.
The Flora common shares to be issued as consideration for the acquisition will be issued in equal quarterly installments commencing on the closing of the transaction. If on each quarterly issuance date, the common shares of Flora are trading below the Flora Share Price, calculated using the 10-day VWAP on NASDAQ (the “Updated Flora Share Price”), the sellers will be entitled to receive the dollar amount difference between the Flora Share Price and the Updated Flora Share Price, in cash or in common shares of Flora, determined using the updated Flora Share Price.
“We are very excited for the opportunity to join the Flora portfolio of brands and will work with the Flora team to continue expanding the presence of Heimat across Switzerland and into the EU as well as entering other new global markets,” said Roger Koch, founder of Koch & Gsell. “This deal may allow Heimat to increase the profitability of our existing hemp lines, speed up the industrial production of new hemp products we already have developed as well as provide us access to Flora’s global network of distribution points and other hemp derived products in demand by our Swiss based retailers.”
About Koch & Gsell
Koch & Gsell (K&G) is a Swiss brand and manufacturing company founded in 2015, that launched a new, innovative tobacco-and-hemp cigarette, which caused a stir across the world. In summer 2019, K&G further launched an industrially manufactured pre-roll cigarette containing pure hemp and has taken steps to protect the method they use to manufacture their hemp products. K&G believes in the gentle yet compelling power of Cannabidiol (CBD) as a relief for many of today’s lifestyle diseases. Much is yet to be discovered, but the tremendous potential of CBD as a powerful alternative to pharmaceuticals is obvious and needs to be made available to customers across the world.
About Flora Growth Corp.
Flora is a cannabis company that leverages natural, cost-effective cultivation practices to supply cannabis derivatives to its diverse business divisions of cosmetics, hemp textiles, and food and beverage. As the operator of one of the largest outdoor cultivation facilities, Flora strives to market a higher-quality premium product at below market prices. By prioritizing natural ingredients and value-chain sustainability across its portfolio, Flora creates premium products that help consumers restore and thrive. Visit www.floragrowth.ca or follow @floragrowthcorp on social for more information.
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