WeedMD Inc (OTCMKTS:WDDMF) has agreed to take over Starseed Holdings Inc for $78 million. The patient and distribution channels of Starseed will strengthen WeedMD’s position in medical cannabis. WeedMD will also improve capital through this acquisition. Canada based Labourer’s Pension Fund will invest $25 million in WeedMD.
Economical and high-quality production
The takeover of Steerseed provides a high margin and economical for sales channel for WeedMD. As a result, it will become a vertically integrated company for the entire supply chain.
Chief Executive Officer of WeedMD, Keith Merker, said the company will achieve long term success through three pillars – unique distribution, quality production, and a strong balance sheet in cannabis space. With this acquisition, WeedMD will improve margins and distribution capabilities.
President of Starseed, Angelo Tsebelis, said combining its strengths with processing capabilities and quality cultivation assets of WeedMD will help to accelerate growth in the future.
What are the benefits to shareholders of WeedMD?
High margin sales channels of Starseed and low-cost manufacturing platform of WeedMD will improve margins. The rapidly growing customer base of Starseed will get ample supply from WeedMD. Starseed generates annual medical revenues of $10 million. The company will also supply cannabis with the help of the cultivation platform of WeedMD to the adult-use market.
CX Industries, a wholly-owned subsidiary of WeedMD, expects to increase extraction and processing capacity by the end of 2020 to 200,000 kgs. It provides international and Canadian markets with innovative consumption methods. WeedMD expects to meet the growing demand for cannabis by leveraging the distribution and packaging capabilities of Starseed at Bowmanville facility. Starseed will achieve significant cost savings by transitioning to WeedMD’s internal supply.
WeedMD has reported revenues of $6.7 million in Q3 2019. Chief Finance Officer of WeedMD, Nichola Thompson, said the company focused on outdoor cultivation operations and scaled-up production at its greenhouse. The per gram outdoor cultivation cost is $0.16. Its internal cultivation cost per gram is $0.72. WeedMD is ready to process high quality and low-cost cannabis to produce a host of high margin finished products and improve the top line. The company expects to achieve dry weight of over eight tons from its harvest on 27-acre cannabis cultivation.