. () () (FRA:AC4) unveiled significant expansion moves after the market close on Tuesday, announcing plans to acquire both Green Therapeutics LLC and 2750176 Ontario Inc., known as ALPS, and getting a new CEO in the process. 

The company said it has entered into a non-binding term sheet dated January 4, 2020, with Green Therapeutics (GT) and the holders of the issued and outstanding membership interests of GT, setting forth the terms of a proposed transaction pursuant to which Australis will purchase 100% of the issued and outstanding membership interests in GT. 

Australis will pay to the holders of the GT, membership interests between C$9.5 million and C$10 million for 100% of the outstanding GT membership interests. 

READ: Australis taps cannabis finance veteran Jon Paul to CFO role, offers corporate update amid leadership transition

Prior to completing the acquisition, the group added, the parties have agreed to settle a previously announced legal dispute regarding the original May 2019 transaction, when Australis had acquired certain non-operational GT assets.

GT is an award-winning, Nevada-based cannabis company with a strong brand portfolio of high-end dried flower and designer/luxury derivative products. GT was co-founded by former MedMen president – and current Australis interim CEO - Dr Duke Fu and is led by a strong team of medical professionals and pharmaceutical manufacturing experts.

The firm operates an 8,000 square foot facility in Nevada and its brands are carried by 52% of Nevada-based dispensaries, with further market penetration expected as production capacity is expanded. GT also has a manufacturing license in Oklahoma and a 25% interest in an extraction and processing license in Missouri.

Australis said the transaction, if completed, will be immediately accretive to its results as the current Nevada assets - which are the subject of the settled legal dispute - are non-operational. It is anticipated that GT's brands will be scaled up across multiple US jurisdictions.

Dr Fu commented: "Folding the entire GT portfolio into AUSA will provide us with the firepower and networks to take our brands across the nation. With numerous initiatives on the go, shareholders can expect to receive frequent updates as we expand our business. I have been impressed with the capabilities and vision of the renewed AUSA board, with governance front and centre, as well as its ability to execute rapidly and diligently, and look forward to continue working closely with what I consider to be one of the premier teams in the industry."

ALPS acquisition

In a separate statement, Australis said that it has entered into a non-binding term, along with the holders of the outstanding shares of ALPS, whereby the company is to acquire 51% of the issued and outstanding shares of ALPS, with an option to purchase the remaining 49%.

ALPS, formerly Aurora Larssen Projects, is a global leader in facility design, construction management and (post) commissioning services to the horticultural sector across a wide variety of commercial crops.

The firm is also a world leader with respect to design and construction of cultivation facilities for other plants, including mushrooms, fruits, vegetables, flowers and other varietals. ALPS provides comprehensive expertise and support to clients from the initiation of the business concept all the way through to operational success.

Australis anticipates that, upon completion, the proposed transaction will be accretive immediately to the company's financial position and thus increase shareholder value.

ALPS' business model includes both project-based fees and recurring service revenues. With excellent gross margins, ALPS management projects 2021 EBITDA margins of about 30%, with the expectation of substantial margin expansion in subsequent years.

It is anticipated that ALPS licensed cultivation partners will grow Australis-owned and branded cultivars such as Mr. Natural and Green Therapeutics. It is intended that certain of this Biomass grown by the ALPS’ partners will be purchased by Australis at favorable terms, and processed into the company’s proprietary branded products for adult and medical use retail distribution.

New boss

As a condition to the completion of the proposed transaction, Terry Booth, currently a principal of ALPS, will become CEO of Australis at closing, taking over from Dr Duke Fu, who has been serving as Interim CEO since the November 17, 2020, annual and special meeting of shareholders.

At such time, Dr Fu will take on the role of COO of the company, focusing on driving organic growth.

Booth, a cannabis industry icon, has the complete set of tools to move AUSA forward in the MSO space. He built Aurora Cannabis from a late starter to a multi-billion dollar cannabis industry leader, is a seasoned entrepreneur, capital market savvy, has a deep grasp of the requirements to be successful in the global medical and recreational markets, and has a track record of winning and building multiple successful companies.

"We anticipate that this transaction, upon its completion, will be game-changing and immediately accretive, and marks the first and crucial step in the transformation of AUSA to become the Company it was always meant to be: a profitable and rapidly growing MSO," said Dr Fu in the statement.

"We believe that through ALPS, we will be able to secure a supply of reliable and high-quality input material to fuel our multi-state roll-out, while at the same time generating free cash flow to accelerate the growth of our business. This is what we promised AUSA shareholders, and this is what we are executing on. Rapidly."

Terry Booth added: "With yesterday's announcement of the acquisition of Green Therapeutics, we now have assembled two foundational pieces to execute on our aggressive growth strategy. Combining the industry's pre-eminent cultivation experts with the award-winning brands and operations of Green Therapeutics, and Mr. Natural provides us with the ability to rapidly scale our brands and accelerate value creation. This combination is exceptionally hard to emulate, providing significant and sustainable competitive advantages that clearly differentiate AUSA from the rest of the industry."

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