Israeli cannabis producer Cannbit is set to acquire the Israeli operations of cannabis company Tikun Olam for about $42 million, Globes reported Monday.
If Cannbit’s market cap reaches $1 billion within five years, the company will pay another $18 million to Tikun Olam, according to Globes.
In August, CTech by Calcalist reported that Tikun Olam founder Tzahi Cohen, who owns a 90 percent stake in the company, decided to sell its Israeli business after 11 years. The Israeli financial daily said that while Tikun Olam controlled about half of the Israeli medical cannabis market until earlier this year, it had to notify patients of a supply shortage due to delays caused by a planned farm relocation. The relocation occurred because of a legal reform that enforced stricter regulations across the entire Israeli medical cannabis network.
Israel’s Ministry of Health did not restore Tikun Olam’s license to grow cannabis after the move and cited the Israel Police, which recommended that Cohen not participate in the medical cannabis business, CTech reported. After dealing with the matter in court, a Jerusalem district court ruled Cohen must reduce his take in the company to under five percent in order to reinstate Tikun Olam’s license.
Cohen initially asked for a whopping $100 million, which reportedly put off some of the potential buyers, but the price has gone down considerably.
Tikun Olam currently sells medical cannabis to some 3,000 patients a month, considerably lower than its past customer base of about 10,000.
Tikun Olam’s physical assets include a small growing facility in the central Israel moshav Bet Yehoshua and a cannabis processing facility under construction in Tsiporit, an industrial area in Nazareth Illit, according to Globes.
Tikun Olam has growing, manufacturing, and distribution operations in the US, Canada, Australia, and Greece, which are not for sale.
“The deal positions Cannbit as a genuine leading company active along the whole value chain. This deal will enable Cannnbit to position itself in advance of an offering overseas on the basis of Tikun Olam’s strong brand. Its facility will be one of the largest of its kind in the world,” Cannbit CEO Ifat Kariv told Globes.
Earlier this year, Cannbit announced it will produce NIS 4.8 million ($1,355,760) worth of cannabis for Tikun Olam. Under the agreement, Cannbit would grow Tikun Olam’s two unique cannabis strains based on a growing protocol developed by Tikun Olam.