FLGC: Recent results underscore benefits of M&A in growth strategy

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By M. Marin



3Q22 results reflect benefits of M&A initiatives

Flora Growth Corp.’s (NASDAQ:FLGC) 3Q22 results benefited from the integrations of recently acquired companies. Total revenue of $10.8 million was up more than five-fold from $2.1 million in 3Q21, driven largely by the integrations of JustCBD and Vessel into Flora’s House of Brands division. On the back of the strong revenue growth, FLGC reiterated 2022 revenue guidance of $35 million to $45 million. The company is pursuing an ambitious growth strategy, building an ecosystem to support multiple consumer categories of cannabis, plant-based wellness merchandise and lifestyle brands and establishing a presence globally in key markets.

FGH special shareholder meeting coming up …

Towards this goal, FLGC recently signed an agreement to acquire Franchise Global Health (TSXV:FGH) in an all-stock transaction that places a roughly CA$40.0 million valuation on Franchise Global Health. Franchise Global Health plans to hold a special shareholder meeting regarding the pending acquisition by FLGC scheduled for December 13, 2022. FLGC expects the deal to close by yearend 2022.

If the deal is consummated, Flora Growth believes it could be transformative, as the company pursues an ambitious growth strategy to build an ecosystem to support multiple consumer categories of cannabis, plant-based wellness merchandise and lifestyle brands. Flora expects Franchise Global Health can enable it to connect its Colombian-grown cannabis directly with German-based pharmaceutical and medical cannabis distribution. Franchise Global Health already has established a presence in the German pharmaceutical market through its wholly owned subsidiaries ACA Muller and Phatebo. Franchise Global Health’s German businesses operate primarily in the export pharmaceutical and medical cannabis import and distribution markets, servicing 1,200 pharmacies in Germany via its subsidiaries. Franchise Global Health also has operations, and/or strategic partnerships and investments in St. Vincent and the Grenadines, Portugal and Denmark. FLGC management intends to leverage Franchise Global Health's distribution and logistics capabilities in Europe to further expand its CBD business in the greater European market.

The acquisition is consistent with FLGC’s strategy to leverage strategic M&A to enhance its product portfolio and accelerate growth. Other important recent acquisitions include Vessel Brand and JustCBD, noted above, as well as High Roller Private Label, Masaya.

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