The Elixinol Global Ltd (ASX: EXL) share price rocketed 15% on open this morning and is currently up 5% in intraday trading.
This comes after the ASX hemp company revealed it would acquire a leading German cannabidiol (CBD) company.
Elixinol shares were placed in a trading halt on 4 March at the company's request, pending this announcement. Shares started trading on the ASX again this morning.
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What did Elixinol report on its acquisition agreement?
The Elixinol share price is moving higher after the company reported it would acquire CannaCare Health GmbH.
CannaCare owns CANOBO, which is among Germany's top CBD brands with a dominant position in Germany's drugstores. CANOBO has more than 4,500 physical retail distribution points, and its 20 products include CBD oils, sprays and skincare.
In the 2020 financial year, CannaCare reported 2.6 million euros (AU$4 million) in revenue with earnings before interest, taxes, depreciation and amortisation (EBITDA) breaking even.
Elixinol noted that Germany's CBD market was expected to grow faster than any other in Europe. The compound annual growth rate (CAGR) of 47% or more is forecast to reach US$600 million by 2025.
The agreement stipulates Elixinol will pay 9 million euros upfront, with 3 million euros in cash and the other 6 million euros in Elixinol shares.
The company reported that "upon attainment of FY2021 revenues of 12.9 million euros and 20% EBITDA, the maximum earn-out of 15.0 million euros is payable in Elixinol shares, making a total potential consideration of 24.0 million".
Management commentary
Commenting on the binding agreement, Elixinol global CEO Oliver Horn said:
We are incredibly excited about this transformational opportunity which leapfrogs Elixinol closer to its vision of becoming a profitable, global, hemp-derived consumer goods wellness business…
By acquiring CannaCare, we gain a strong foothold in Europe's fastest growth market of Germany and, together with our established UK business, will become a leading pan-European business of scale.
Completion of the agreement remains subject to all the standard conditions.
Elixinol share price snapshot
Over the past 12 months, Elixinol shares are down 18%. That compares to a 38% gain on the All Ordinaries Index (ASX: XAO).
Year-to-date, the Elixinol share price is up 14%.
