GoodLeaf and Highlands Investments merge in a R650 million cannabis business deal

By Edward Tsumele, Cannabis Business Africa Editor

If there was any doubt about the growth of this emerging  cannabis industry  in South Africa, the merger of two of the leading cannabis companies GoodLeaf and Highlands Investments  in a deal worth R650 million should remove such doubt.

The two companies in a joint statement yesterday, June, 3, 2021, announced this development.

Goodleaf Company (“Goodleaf”), is a leading cannabis brand in South Africa, and Highlands Investments (“Highlands”), was formerly known  as Canopy Growth Africa.

The transaction will result in the largest vertically integrated cannabis operation in Africa, with an investment in excess of R350 million (USD ~ $25 million) to date.

“We are delighted to have successfully concluded this merger, and in doing so created Africa’s first truly seed-to-sale offering,” says Warren Schewitz, Founder and Chief Executive Officer of Goodleaf. “It has always been our intention to create a world-class global brand, and as we achieve scale, it is essential to ensure we have access to high-quality supply, which Highlands affords.”

“We are seeing renewed interest in the cannabis industry globally and this transaction brings together two of the biggest cannabis players in Africa,” says Jody Aufrichtig, Founder – Highlands Investments. “Highlands is the first ISO 22000 grade cannabis producer in Africa, the quality of our product is world-class, and I believe that this combined offering will enable us to make significant inroads globally, because we can compete both on quality and price.”

Goodleaf, a premium CBD brand, has commercialized a portfolio of 30 products in multiple categories, and has well established distribution lines through leading retail stores, online, wholesale, and coffee shops in South Africa. Goodleaf’s products will soon be exported to leading retailers in Asia and Europe and are available through a leading online E-Commerce platform www.goodleaf.co.za

“Consumers are increasingly demanding quality products with a known origin,” says Schewitz. “Lesotho’s pristine growing environment, combined with Highlands commitment to GACP (“Good Agricultural and Collection Practices”) and ISO 22000 standards, ensures we have access to a reliable, certified high-quality supply, as we scale-up and expand our offering to meet this need.”

Highlands has an excellent track record of producing premium CBD flower. In April 2021 it concluded its fourth and most successful harvest at its Kolojane facility in Lesotho. The outdoor harvest, which is ISO 22000 certified, yielded almost six tonnes of premium cannabis flower and trim; a significant portion of the harvest is destined for the European medical cannabis market. Highlands will continue to supply bulk CBD and THC flower, distillate and isolate to global medical and wellness markets.

“This is a transformational transaction for Goodleaf. Finding a strategic partner in Highlands ensures that we are able to diversify our business into a fully seed-to-sale offering, further strengthening our presence as a leader in the South African cannabis market, and provides a low cost production, manufacturing and distribution base for our extensive product range as we expand into global markets,” Schewitz concludes.

Under terms of the transaction, Highlands Investments shareholders will have 35% shareholding in the merged entity, with Goodleaf being the majority shareholder at 65%. The merged entity will continue to trade as Goodleaf and Highlands Investments until further notice.

However this merger follows a similar trend of cannabis companies in the US, merging for competitive advantage as the industry there has been developing at a fast pace in recent years as State after State is increasingly legalizing cannabis either for medical use, adult use or both. So far in the US, the states that have legalised cannabis are reaping tax revenue.

And according to a Green Market Report  on May 17, 2021, CuraLeaf, the biggest cannabis company in the US with its Colorado market worth  US $ 2.2 billon, it announced its merger with a grow company there in a deal worth  $67 million dollars

Curaleaf Holdings, Inc. (OTCQX: CURLF) is buying the largest outdoor grow in Colorado known as Los Sueños Farms in a deal valued at $67 million. The transaction is a mix of cash and stock. Curaleaf said this will significantly expand its Colorado presence, vertically integrating within the state. The proposed acquisition includes three Pueblo, Colorado outdoor cannabis grow facilities covering 66 acres of cultivation capacity, including land, equipment, and licensed operating entities, 1,800 plant indoor grow and two retail cannabis dispensary locations serving adult-use customers. An additional contingent consideration of up to $8 million in stock will be paid based upon operating cash flow-based targets for 2022.  Boris Jordan, Executive Chairman of Curaleaf, stated, “The acquisition of Los Sueños provides Curaleaf with outdoor cannabis cultivation expertise at commercial scale and establishes our foothold in the $2.2 billion Colorado market,”  the Green Market Report said.

Though cannabis remains illegal at federal level, US legislators are currently involved in crafting lesgislation that could result in cannabis being legally throughout the country If the laws are passed by Congress and that means both The House of Representatives and the Senate.

IN the meantime on Wednesday, in a move that could have a boost to the push for Congress to pass laws  that would see cannabis legal in the whole of the US instead of only in the states that have legalised for or are in the process of legalizing cannabis, Amazon, US’s second biggest company went public about supporting federal legalization of cannabis. Amazon’s endorsement is crucial  in many ways, including the possibility of cannabis products being sold online globally by this giant If the US federal government legalizes it.

“U.S. cannabis industry and federal lawmakers take notice: The nation’s second-largest company is embracing nationwide marijuana legalization.

Online retail giant Amazon on Wednesday endorsed the U.S. House of Representatives’ federal marijuana reform bill and said it would no longer include cannabis in its drug screening process except for positions regulated by the U.S. Department of Transportation.

In a blog post, Dave Clark, Amazon’s CEO of worldwide consumer, said the Seattle-based company’s public policy team will actively support the Marijuana Opportunity Reinvestment and Expungement Act of 2021 (MORE Act).

The social justice-focused measure would remove the plant from the federal Controlled Substances Act, expunge marijuana criminal records and invest in communities disadvantaged by the war on drugs.

“We hope that other employers will join us and that policymakers will act swiftly to pass this law,” Clark wrote.

He wrote that Amazon will also treat marijuana use the same as alcohol.

It’s unclear how much sway Amazon will have in the public-policy arena around marijuana legalization. But the company’s vocal position illustrates that it recognizes that public sentiment is firmly behind legalization.

According to the most recent Gallup public opinion poll, a record 68% of Americans support marijuana legalization, putting increasing pressure on federal lawmakers to pass reforms,” reports US cannabis specialist publication MJBizDaily.

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