TORONTO: Halo Labs Inc. ("Halo" or the "Company") (NEO: HALO, OTCQX: AGEEF, Germany: A9KN) is pleased to announce that it has entered into a non-binding letter of intent (LOI) for the proposed acquisition of Bophelo Bioscience & Wellness (Pty) Ltd (“Bophelo”) (the “Transaction”). The Transaction is expected to strengthen the Company’s position in Lesotho, Africa, a country quickly becoming the continent’s export gateway to the global cannabis market. Lesotho is the first African country to grant medical marijuana licenses for cultivation and patient use and is making strides toward becoming the worldwide export hub for cannabis. Halo’s planned acquisition of Bophelo brings together two socially-minded companies on a shared mission to better the communities in Lesotho.
“The social benefits of our public-private partnership are extremely important to me. Halo shares that commitment and these values will differentiate us from our competitors.”
Halo’s initial partnership with Bophelo included operation of the 5-hectare cultivation and production site and purchase of its entire production in exchange for a 20% equity stake and a royalty on cannabis sales. In a growing consumer market, Halo now intends to purchase the entire issued share capital of Bophelo for 40,786,667 common shares in the capital of Halo (approximately USD $18.4M or CAD $24.7M).
Supreme Cannabis (TSX: FIRE) and Canopy Growth Corporation (TSX: WEED) made significant investments in Lesotho recently with Supreme Cannabis making a CAD $10M strategic investment in Medigrow Lesotho (Pty) in exchange for a 10% ownership interest in that company, and Canopy Growth Corporation acquiring 100% of DaddyCann Lesotho (Pty) Ltd for CAD $28.8M.
This Transaction is expected to strengthen Halo’s position in a region strategically set to become the international breadbasket of Good Agricultural and Collecting Practice (GACP) and EU Good Manufacturing Practices (GMP)-grade cannabis isolates and distillates. GACP and GMP designations demonstrate Halo’s capability to grow and manufacture at scale while adhering to high-quality standards and enables distribution to European and international pharmaceutical and nutraceutical companies in these attractive and growing markets.
Beyond providing a source of low-cost cannabis inputs and products for Europe and other regions, Africa as a continent boasts a strong consumer market. According to New Frontier, there are over 83 million annual cannabis consumers on the continent and the current market is estimated at USD $37.3 billion in combined legal and illegal sales out of the total USD $344.4 billion worldwide. This emerging opportunity will be unlocked with increased cannabis decriminalization and legalization policies, such as neighboring South Africa; which in 2018 approved private use and decriminalized possession, a market which according to the March 2019 Prohibition Partners Africa Report is now expected to be worth USD $1.851 billion by 2023.
Kiran Sidhu, the CEO of Halo Labs, commented, “The high-altitude, low-humidity climate and access to water, as well as low cost utility, tax, and labor rates mean cannabis in Lesotho can be cultivated naturally at a very competitive cost. While most of the licenses issued to date restrict cultivation to 2-3 hectares and indoor or greenhouse growing, Bophelo operates one of the largest sites in Lesotho at 5 hectares. The state has also given Bophelo preliminary approval to expand up to 200 hectares and has indicated they would consider granting permission for outdoor growing from 2019 onwards, following consultation with the INCB (International Narcotics Control Board). Bophelo has secured this site with a 20-year lease and option to renew for an additional 30 years.”
Once fully operational on the initial 5 hectare site, Bophelo intends to harvest GACP cultivated cannabis approximately twice per annum and will have the potential to produce approximately 4.6M grams of high quality EU GMP cannabis concentrate per annum.
Mr. Sidhu continued, “We anticipate EU GMP cannabis concentrate would be exported to the European market at an estimated price of USD $10 per gram while our FOB Lesotho all-in cost ready for export would not exceed USD $2 per gram. We expect the initial planting to occur in November and to complete our first harvest by the second quarter of 2019. Bophelo will also give Halo Labs an international platform for our innovative products like the DabTabs™ Dablets, the first ASTM C373-18 certified doseable cannabis product.”
Halo continues to solidify its reputation as a leader in cannabis oil and concentrates and is now the first U.S. based publicly traded company to make an investment into Lesotho. Upon closing of the Transaction, Halo will expand its global footprint and be one of the first cannabis companies in the world to have products and technology carried across the EU, the United States, and Africa.
The Chairman and non-executive director of Bophelo, Ms. Louisa Mojela, stated, “The acquisition of Bophelo by Halo Labs gives me great hope for the future of Africa’s cannabis industry. I am glad to be working with Halo’s executive team, too. Together we will strengthen Lesotho’s position as the breadbasket for Europe, Australia, and other global markets.” Ms. Mojela is among Africa’s most successful business personalities and a prominent citizen of Lesotho. She has been recognized by countless international organizations for her contributions to business, women, and impoverished communities winning an All Africa Business Leaders award by CNBC in 2016.
Halo’s acquisition of Bophelo will further solidify the Company’s strategic vision in addition to exemplifying its support of social responsibility initiatives. For example, the land leased by Bophelo is held by a non-profit trust that benefits the community. 10% (ten percent) of Bophelo’s pre-tax profits will go to this trust and be given back to the people of Lesotho. Both Ms. Mojela and Mr. Sidhu are like-minded about social impact and equity. Through support from the trust, Ms. Mojela has founded and built a school on Bophelo’s premises and Mr. Sidhu is personally donating computers for the school’s students. Ms. Mojela commented, “The social benefits of our public-private partnership are extremely important to me. Halo shares that commitment and these values will differentiate us from our competitors.”
Chairman of Halo Labs, G. Scott Paterson, summed up anticipated benefits from the transaction, “The proposed acquisition of Bophelo is game changing for Halo and important for the global cannabis economy. We are enthusiastic about the Lesotho opportunity and operating a scale cultivation and production facility for the international export of oil and concentrates. We expect a lift both to revenue and profit and are looking forward to delivering these financial results to our shareholders.”
Completion of the Transaction is subject to, among other things, the negotiation and execution of a mutually agreeable definitive acquisition agreement and related documents and the satisfaction or waiver of any conditions precedent to the consummation of the Transaction (including the receipt of any requisite regulatory and third-party approvals).