Cannabis company Creso Pharma Limited (ASX: CPH) (OTC:COPHF) (FRA:1X8) is entering the US CBD market, following a purchase agreement to acquire Colorado-based consumer packaged goods company, Sierra Sage Herbs, LLC. 

Under the agreement and subject to shareholder approval, Creso Pharma, via its wholly-owned subsidiary, Creso Pharma US, Inc, will purchase a 100% interest in SSH for a total upfront consideration of $21 million, payable by the issue of fully paid ordinary shares, based on the 10-day volume-weighted average price at the date of execution of the agreement, being $0.083, and the AUD/USD exchange rate as at the date of closing.

Why It Matters

The acquisition provides Creso Pharma with its maiden entry into the US, an established product suite of plant-based and CBD products generating strong revenues, as well as an existing 90,000 points of sale with major retailers and over 150,000 direct to consumer relationships in one of the world's largest and fastest-growing markets. SSH anticipates that it will add an additional 20,000 points of sale with key retailers over the coming months, providing Creso Pharma with a significant opportunity to further scale sales growth.

"The acquisition of Sierra Sage Herbs and the company's product range is a major milestone for Creso Pharma," said William Lay, Creso's VP of strategy & operations. 

"It marks entry into the US CBD market and provides a strong foundation to rapidly scale up operations, product development and sales, as well as further M&A transactions. The Green Goo product range is well established in the US, evidenced by relationships with key retailers and over 90,000 points of sale, as well as the large direct to consumer base that Sierra Sage Herbs has established in recent years," Lay continued. "We intend to aggressively leverage these relationships and the group's existing customer base by introducing them to Creso Pharma's existing product suite for human health, animal health and sports and recovery."

As part of the transaction, Creso Pharma will appoint SSH co-founder and CEO, Jodi Scott as an executive director and president of US operations.

Upon completion, the acquisition will provide Creso Pharma with an established operating subsidiary in the US allowing the company to swiftly capitalize on any potential legislative changes regarding the use of recreational cannabis on a federal level.

Following any regulatory shifts, Creso Pharma would leverage SSH's operations to supply Mernova Medicinal Inc.'s leading THC products into to US market following all regulatory guidelines.

Photo: Courtesy of Diyahna Lewis on Unsplash