Cann Group has reached an agreement to sell its Southern cultivation and manufacturing facility to Sativite in a transaction valued at close to A$5.5m.
The company had listed the facility for sale in October 2022 as part of a broader strategy to concentrate most of its operations at its Mildura site.
The two companies have agreed on terms covering the sale of the Southern facility's land and business assets, a licensing arrangement for select Cann genetics, and the provision of transition services from Cann to Sativite to support the handover of commercial operations.
The deal is structured in two phases to ensure operations continue without interruption.
In the first phase, Sativite will purchase the land and building for $3.1m and grant Cann a lease to keep running the site on its behalf. A non-refundable 10% deposit has already been paid by Sativite under the sale contract.
The lease, which carries a nominal rental charge, is set to begin on or around the land contract settlement date, currently anticipated to be February 28.
The second phase involves Sativite acquiring Cann's business assets at the site for $1.9m through a binding Memorandum of Understanding (MOU).
Settlement of this phase will occur once Sativite obtains its licence from the Office of Drug Control (ODC) to operate at the facility, which is expected to happen in the second half of 2023. At that point, Sativite will take on responsibility for employing the Cann staff working with those assets.
The MOU also includes an arrangement for Cann to carry out contract manufacturing at the facility on Sativite's behalf. Sativite will pay service fees to cover the operating costs associated with cultivating and producing bulk flower, and the two companies expect to negotiate a separate agreement covering GMP manufacturing of patient-ready flower products.
This arrangement will continue while Sativite awaits ODC approval, after which it will assume full operational control of the site. Sativite already holds an ODC licence for another medicinal cannabis cultivation facility, which the companies said should support its efforts to secure the required approvals for the Southern site.
The companies have additionally agreed that Cann will grant access rights to specific genetic strains for a total fee of $480,000, payable over two years from the land settlement date.
Cann Group CEO Peter Crock said: "We are very pleased that the Southern facility will remain in the medicinal cannabis ecosystem and that the agreement with Sativite will allow commercial operations at Southern to smoothly transition across without negatively impacting the supply of medicines to patients.
"We are working collaboratively with the Office of Drug Control to ensure this transaction proceeds in accordance with all regulatory requirements, as quickly as possible."
Sativite managing director and CEO Mike Cleary added: "Sativite is excited by the opportunity to work with Peter and the team at Cann to continue innovation in the sustainable production of medicines.
"The acquisition of an established production and manufacturing facility continues the journey for Sativite to ensure patients have access to good quality Australian-grown medicines".
