“This is another example of MMJ’s strong market and financial discipline identifying opportunities and bottlenecks in the cannabis value-chain in markets and acting quickly,” MMJ’s Chairman, Mr Peter Wall, said.
He said Sequoya was an opportunity for MMJ to invest in the European Union, which has a large and growing medicinal cannabis market.
MMJ worked with its specialist management company, Embark Ventures, to structure the transaction and Sequoya is the second investment originated for MMJ.
“The investment demonstrates MMJ’s capacity to secure investments in private cannabis businesses which are not generally available to Australian retail and institutional investors, Mr. Wall said.
Sequoya’s immediate focus is to become a significant GMP2-certified hemp CBD supplier, with longer term plans to expand into the legal medical marijuana market across Europe. Sequoya’s cannabis extraction operations will be established in Krakow, Poland, with plans to become a leading supplier of CBD3 extracts and isolate within the European Union.
CBD production from hemp is legal across Europe with no cross-border tariffs within the European Union. Additionally, no specific permits are required for producing hemp-derived CBD in Poland.
MMJ expects Sequoya to provide excellent investment returns:
MMJ’s investment consists of a CAD2.5m convertible note issued by the Canadian holding company which may be converted into approximately 34% of Sequoya’s issued capital within two years. MMJ’s investment will be held through its wholly owned subsidiary Phytotech Medical (UK) Pty Ltd.
MMJ has also secured the rights to make further investments in Sequoya through:
Settlement of the Sequoya investment is expected before 31 August 2019 and will be funded from MMJ’s existing cash reserves of AUD25m.
1 CAD – Canadian dollars
2 GMP stands for Good Manufacturing Practices, and refers to a system of manufacturing that guarantees reproducibility of product quality to set specifications.
3 Cannabidiol (CBD) is a crystalline, nonintoxicating cannabinoid in cannabis and hemp.