By Jon Robinson
A deal which would have ensured the “survival” of a medicinal cannabis producer through a merger with a Scottish CBD firm has collapsed.
An agreement was first announced between Jersey-based Northern Leaf and Voyager last month.
In an announcement on the Aquis Stock Exchange, Voyager’s founder and chief executive Nick Tulloch said the collapse of the merger was “hugely disappointing”.
Northern Leaf had previously warned shareholders that its board would have “no choice but to consider ceasing to trade with immediate effect” if the deal was not completed.
In April 2023, Northern Leaf hired finnCap Cavendish in a bid to float on the London Stock Exchange but failed to secure enough interest.
At the time, Sky News reported that the company hoped to attract a valuation of about £60m.
In a statement issued to the Aquis Stock Exchange, Voyager said the “principal reason for the termination was that the fundraising to support the proposed merger could not be completed in line with Northern Leaf’s requirements for financing its business plan”.
‘A valuable opportunity’
It added: “Voyager commenced discussions with Northern Leaf towards the end of 2023 at a time when Northern Leaf’s business was severely cash constrained.
“Northern Leaf subsequently raised £1.75m in a rights issue from shareholders in December 2023 and, in January 2024, supplied Voyager with its forecasts for 2024 and beyond.
“The parties agreed terms for the proposed merger on the basis of these forecasts which included a plan to undertake a fundraising to provide working capital for the enlarged group.
“As Northern Leaf was likely to need financing by April 2024, the parties agreed to work towards this timetable for completion.
“Voyager considered that the proposed merger represented a valuable opportunity for the company by creating the first vertically integrated cannabis company in the British Isles with both pharmaceutical and health and wellness operations.
“Furthermore, in the opinion of the directors, the scale of Northern Leaf’s facility in Jersey (Channel Islands), which has to date had around £33m spent on it, offset the near term funding requirements given that the initial consideration for the proposed merger was approximately £1m (based on the Voyager share price at the time).
“Following announcement of the proposed merger on 13 March 2024, the two companies commenced the planned fundraising.
“This was well received with a number of confirmed orders from new and existing investors by the first week of April 2024 and a larger number of investors who had indicatively expressed interest in participating, including members of the two companies’ management teams.
“However, in spite of best efforts by both parties, a combination of the Easter holiday period and slower investor response times made it clear that the fundraising was unlikely to complete within the targeted timeframe (noting that issuing shares pursuant to the fundraising was always subject to Voyager shareholder approval).
“Voyager consequently had no option but to terminate the proposed merger.”
Voyager was founded in 2020 and is based in Perth, Scotland, and makes CBD and hemp seed oil products.
If the merger had gone through, the combined group would have been valued at £5m.
‘Circumstances outside of our control’
Mr Tullich said: “Needless to say, it is hugely disappointing to bring our proposed merger with Northern Leaf to an end.
“As we look back over the past few months, a transaction well received by the industry and investors has been prevented by circumstances outside of our control.
“Our interest in expanding in the cannabis sector through M&A is undiminished and we continue to see numerous opportunities.
“Many companies in this space are now cash-constrained due to development costs outpacing market growth and, whilst this does create excellent value propositions, as a management team we go in fully aware that work is needed to reinvigorate or accelerate sales.
“The proposed merger with Northern Leaf was always about bringing together two businesses that could be leaders in their respective halves of the cannabis industry.
“Although that transaction cannot now proceed, it does not change the pace of developments that Voyager already has in place.
“Through contract manufacturing and petcare, we have built a strong position in two significant markets and we expect to continue to make progress in 2024.
“This year we will also enter the CBD non-disposable vape market through our acquisition of Amphora and, with one of the largest product ranges in the UK, supported by in-house development and manufacturing, we are well placed to take advantage of opportunities in the market.”
