Cannabis player Creso Pharma has taken the final step in its acquisition of Health House International (ASX:HHI) by signing to Scheme Implementation Deed for a total value of up to around $4.6 million – based on a Creso share price of A$0.043 per share.

Health House is an international pharmaceutical distributor, specialising in the sale and distribution of medicinal cannabis products across Australia and the UK.

And this acquisition provides Creso Pharma (AX:CPH) with another revenue generating operating division, which has the potential to considerably broaden its international footprint and growth trajectory.

But here’s the kicker – the company says the inclusion of HHI’s revenue in the pro forma company portfolio takes Creso’s unaudited last quarter annualised revenue (based on 30-Sep-22 quarter) to $24 million and growing.

That’s around a 200% increase on Creso’s previous pro forma quarterlies annualised – thanks to HHI’s $15.2 million in revenue in FY22 (an 80.1% increase on FY21 and 154.5% rise on FY20) which was driven by several supply agreements with several pharmaceutical grade Good Manufacturing Practice (GMP) certified manufacturers and producers of high-quality medicinal cannabis products.


Looking for more M&A targets

This acquisition adds to the company’s complementary portfolio of businesses and brands, and it has its eyes peeled for further potential M&A targets.

“The Scheme with Health House reiterates the company’s strategy of leveraging its position to assemble a strategic portfolio of businesses and brands that have complementary strengths across manufacturing, processing, formulation, sales and distribution,” Creso CEO and MD William Lay said.

“Health House provides Creso Pharma with strengthened global distribution, established partnerships into new markets and a revenue profile which will directly benefit our existing portfolio.

“The group has continued to report strong financial results and we have a number of opportunities in train which can further accelerate this, while reducing costs through shared services.

“The integration of HHI continues to progress well at a group level and we look forward to providing additional updates on pending catalysts and further M&A opportunities in the near term.”


Cost reduction opportunities a bonus

As well as providing the company with another revenue generating operating division, the acquisition has the potential to unlock new markets and cross-selling opportunities, and Creso is confident that it can continue to grow HHI’s revenue profile, while reducing operational expenditure across its operations.

Health House has recently divested its German-based business, removing any liabilities to the group’s European operations and is expected to benefit from shared group services, allowing for steep reductions in corporate costs.

The company will absorb HHI’s existing debt and provide a $550,000 cash payment to Zelira Therapeutics Limited, as well as a $800,000 equity issuance to the group (subject to shareholder approval), in order to satisfy HHI’s obligation to Zelira.

The result is that HHI will come into Creso essentially debt free.

Moving forwards, both Creso and HHI are also working towards introducing Mernova Medicinal’s cannabis products into several new markets – including premium dried flower to Australia.


This article was developed in collaboration with Creso Pharma, 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.