Shares in Little Green Pharma Ltd (ASX: LGP) were flying high today on news of an acquisition. By the market’s close, the Little Green Pharma share price was trading at 78 cents – 8.33% higher than yesterday’s closing price.
The medical cannabis company is purchasing a world-class cannabis cultivation and production facility in Denmark through the acquisition of a subsidiary of Canopy Growth Corporation.
Little Green Pharma is undertaking a capital raise to pay for the acquisition. Let’s take a closer look at today’s news.
New acquisition
Little Green Pharma shares had a bumper day after the company advised its latest acquisition positions it as a leading, global, pure-play medical cannabis company.
The Denmark facility is one of the largest cannabis production assets in Europe. It can produce more than 20 tonnes of biomass, including around 12 tonnes of dried cannabis flower, each year.
It includes a 21,500 square metre cultivation site and a 4,000 square metre postharvest manufacturing site.
The facility will increase Little Green Pharma’s cultivation to eight times its current capacity.
The company also says that locating production in Europe means it avoids import and export restrictions when supplying to European markets.
The acquisition will cost Little Green Pharma around $21.4 million.
The first half will be paid when the acquisition is completed. The remainder will be paid 12 months later at an interest rate of 12.5%.
The company is looking to raise $27.2 million to pay for the acquisition. To do so, it will conduct a placement for institutional and sophisticated investors. The placement will see 45.3 million new Little Green Pharma shares offered at 60 cents apiece.
The company said it will continue with plans to purchase the land around its Australian facility, which it believes is beneficial for longer-term growth.
Commentary from management
Little Green Pharma managing director Fleta Solomon commented on the acquisition:
We have been speaking for some time about the need to increase our production capacity and the Denmark facility not only gives us the cultivation and manufacturing capacity we need but does so immediately. We won’t be constrained by the two-year build and permitting time required to expand our existing West Australian facility…
… the Denmark Facility [provides] immediate access to medical grade product at volumes that will allow us the opportunity to accelerate our growth strategy.
Little Green Pharma share price snapshot
It has been a good year for the Little Green Pharma share price so far.
Currently, the company’s shares are up nearly 40% year to date. They have also gained around 121% since this time last year.
The company has a market capitalisation of around $105 million, with approximately 187 million shares outstanding.
The post Why the Little Green Pharma (ASX:LGP) share price fired up 8% today appeared first on The Motley Fool Australia.
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More reading
- Here’s why the Little Green Pharma (ASX:LGP) share price is down 5%
Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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