Special Report: CannPal Animal Therapeutics (ASX:CP1) has entered into a scheme implementation deed with AusCann Group Holdings (ASX:AC8), agreeing to be acquired for $17.5 million.

CannPal shareholders will receive 1.3 shares in AusCann for each CannPal share they hold, if they approve the merger of the two medicinal cannabis companies at a meeting set to be convened early next year.

Based on their one-week volume-weighted average prices, that values each CannPal share at 18.4c – a 54 per cent premium to its recent share price of 12c.

Auscann is a Perth-based pharmaceutical company focused on the development, production and distribution of cannabinoid-based medicines within Australia and internationally.

Its recently launched it’s proprietary hard-shell THC/CBD capsules under the Neuvis brand, which are available by prescription to Australian patients under the special access scheme.

CannPal meanwhile is devoted to animal health products using compounds derived from hemp and cannabis plants. It’s preparing to launch it’s DermaCann skin nutraceutical for dogs in South Africa, Australia, New Zealand and the United States.

Combining the two companies, says CannPal, “presents an attractive opportunity for both CannPal and AusCann shareholders due to the strengthened leadership team, shared research and know-how across human and animal health, strong financial position, and the economies of scale that better positions the merged group to generate long-term sustainable growth.”

“There is a great logic to combining Cannpal Animal Therapeutics Ltd with AusCann Group Holdings Ltd, with the new business having enhanced capability to exercise the potential for new and stronger commercial pathways,” says CannPal chairman Geoff Starr.

“The synergies around local and overseas market knowledge and research and development know-how will enable faster to market solutions.

“It represents a unique and compelling value proposition for both companies.”

Well-positioned to lead

AusCann chairman Max Johnston says that combining the two companies would be a game-changer for both of them.

“The combined business is expected to have the financial resources and technical expertise to accelerate the growth, commercialisation and market penetration of its pipeline products in Australia and offshore,” he said.

“The complementary nature of developing new health solutions for both human and animal and creating a much larger addressable market makes this combination a game changer for both companies.

“The combined resources position the new company well to take a leadership position within this new health industry sector.”

Unanimous recommendation

The board of CannPal has unanimously recommended that shareholders vote in favour of the merger and intend to do so themselves, as long as an independent expert concludes it is in shareholders’ interests.

The Merchant Opportunities Fund, a small-cap fund managed out of Perth that’s CannPal’s largest shareholder, holding a 19.88 per cent stake, has indicated it will vote all of its shares in favour of the scheme.

Scheme documents are expected to be dispatched to CannPal shareholders in January. If shareholders approve the scheme, the merger is expected to be implemented in March 2021.

This article was developed in collaboration with CannPal Animal Therapeutics, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.