Ecofibre has reached an agreement to divest its hemp food and animal products division, Ananda Food, to Elixinol Wellness for A$3 million.
Under the terms of the deal, a $2 million cash payment will be made upon completion, which is expected in late March. A further $1 million earnout payment will depend on the value of cat litter product sales recorded between April 1, 2024, and June 30, 2025.
To fund the purchase, along with marketing expenses and general working capital, Elixinol intends to raise $3.16 million through a fully underwritten, non-renounceable entitlement offer. The transaction is contingent on the successful completion of that raise.
In a statement to the ASX, Elixinol said the raise had received "strong support from new and existing institutional and sophisticated investors," adding it will also support the company on its pathway to EBITDA breakeven "expected to be achieved by mid-CY24."
Group CEO and MD Ron Dufficy said the acquisition will "strengthen and broaden" the firm's hemp ingredients portfolio making it "one of the largest suppliers of hemp ingredients in Australia across both branded and private-label products."
He added: "It is complementary to our existing hemp product range and will bring improved unit economics through increased production yields and asset utilisation and create opportunities for significant cost and revenue synergies."
Ecofibre stated that proceeds from the sale would go toward additional working capital for the group "as it continues to refine its focus on core businesses and reduce debt."
Chair Vanessa Wallace added: "Ananda Food is currently too small to deliver near-term cash profits from its hemp food and pet products business. This sale will deliver a good outcome for Ecofibre's shareholders and enable a sustainable future for the combined business."
