Melodiol Global Health has entered an agreement to sell its Canadian Mernova facility for as much as A$14.2 million, a transaction that would clear the company's secured debt while leaving it dependent on outside manufacturers for product supply.
The ASX-listed parent company of Health House has signed a non-binding letter of intent with Canada-based Nacerna Life Sciences to offload the 2,230 square metre building for an upfront payment of $12m, with an additional $2.2m contingent on the buyer reaching specified production milestones.
Melodiol, which carries a market capitalisation of $1.1m, had flagged a potential sale of the Mernova facility and land the previous month, with speculation at the time that a leaseback arrangement could be part of the structure.
The agreement reached with Nacerna contains no such leaseback provision, meaning Melodiol would be left without its own production facility for its core Ritual brand, which it plans to keep.
The company said it intends to source third party flower in an "attempt to continue marketing its Ritual products in the Canadian marketplace, thereby aspiring to retain some level of sales".
The Ritual brand generated $6.9m in revenue during FY24, accounting for 32% of the company's total.
Melodiol chief executive William Lay said the sale will significantly improve the company's balance sheet and free up additional working capital for Health House and Creso Pharma Switzerland.
"Following the expected repayment of all secured debt, the company will be in a stronger financial position and able to focus all of its efforts on continued growth in the remaining business units while aggressively pursuing its long-term strategic objectives of group cash flow positivity," he said.
Nacerna has been granted a 60-day exclusivity window to carry out due diligence on the facility.
