Creso Pharma has advanced its takeover of Health House International (HHI) and indicated it plans to pursue additional acquisitions in the short term.
The two companies have executed a Scheme Implementation Deed, setting the stage for Creso to gain full ownership of the Australian distribution business in a transaction valued at up to A$4.6 million.
The approximately 108 million shares to be issued to HHI shareholders will account for roughly 5.5% of Creso's total stock.
The announcement of progress on the deal follows HHI's completion of the sale of its German subsidiary CanPharma — which it acquired in 2021 — for €1.
In what proved to be an eventful stretch for both companies, Creso also parted ways with chairman Dr James Ellingford in an unrelated matter, following an unusual series of TikTok posts in which he documented his relationship with a woman 35 years his junior.
Non-executive director Boaz Wachtel has stepped in to replace Ellingford as chairman.
The implementation deed requires Creso to inject an additional $900,000 into Health House as working capital and to clear its outstanding debt to Zelira Therapeutics, which arose after a deal between HHI and Zelira fell through in June.
Of the amount owed to Zelira, $550,000 will be paid in cash immediately, with a further $800,000 settled in equity.
Separately, Creso will also settle a debt to another HHI creditor, Celtic Capital, through $400,000 in convertible notes.
Creso managing director William Lay said Health House will provide the business with "strengthened global distribution, established partnerships into new markets and a revenue profile which will directly benefit our existing portfolio".
"The group has continued to report strong financial results and we have a number of opportunities in train which can further accelerate this, while reducing costs through shared services," he said, adding that Creso will provide "additional updates on potential M&A opportunities in the near term".
Among the opportunities the Health House deal opens up is the importation into Australia of cannabis grown by Creso subsidiary Mernova Medicinal, which the company said in its ASX filing would "fast track cash flow breakeven".
Health House posted revenue of $15.6m in FY22, an 85% increase on the prior year, though losses widened from $5.3m to $17m, a figure that included a goodwill impairment of nearly $9m.
In a separate ASX update, Mernova announced it had received a $280,000 flower order from Canadian wholesale distributor Weed Pool, the largest in the subsidiary's history.
On the CanPharma sale, Health House confirmed the transaction to Sabine Jacker was complete. Jacker paid €1 for the business but will assume liabilities totalling $4.5m.
CanPharma founder Dr Henrik Sprengel has resigned with immediate effect from his role as executive director of Health House.