Cannbit, listed on the Tel Aviv Stock Exchange (TASE), announced today the completion of a deal to acquire the Israeli activity of privately owned cannabis company Tikun Olam. Cannbit will pay $23 million immediately and 4.99% of its shares (Cannbit's market cap today is NIS 246 million, so the shares are worth NIS 12.3 million ($3.5 million)).
Cannbit will also pay $18 million more if it reaches NIS 1 billion revenue within five years. In its announcement to the TASE, Cannbit explained that it would pay only $23 million, not $42 million, as written in the memorandum of understanding signed by the companies, because Cannbit had undertaken to pay the rest of the cost for building the production plant in the Tsiporit Industrial Zone. Under the original agreement, Tikun Olam was to have been responsible for building the plant. Although Tikun Olam estimated the necessary investment for the plant at $2.5 million, the difference in the company value is $19 million.
This price is much lower than the $100 million for which Tikun Olam initially sought to sell its Israeli activity. A valuation attached to the deal gave a $31 million value for the activity.
Tikun Olam owner Yitzhak (Tzachi) Cohen was forced to sell the successful international cannabis company's Israeli activity when the Ministry of Health asserted that he was not eligible to be a party at interest in a cannabis company because of police intelligence information about his ties with a criminal organization.
Read more at globes.co.il