Market Overview

Neptune Wellness Solutions Expands Into US Through SugarLeaf Labs Acquisition


Neptune Wellness Solutions Inc (NASDAQ: NEPT), a Canada-based company engaged in extraction, purification and formulation of health and wellness products, announced plans to establish a presence in the U.S. through the acquisition of a hemp company.

What Happened

Neptune will acquire all assets of SugarLeaf Labs, LLC and Forest Remedies LLC. Both enterprises operate as a single registered North Carolina-based commercial hemp company.

The value of the deal is estimated at a maximum of up to $150 million. Neptune will pay an initial consideration of $18 million at closing, consisting of $12 million in cash and the rest in stock. Over each of the next three years, Neptune will pay the additional consideration of up to $132 million as a combination of cash and shares, following the achievement of certain annual adjusted EBITDA and other performance targets.

Neptune Wellness expects to close the transaction, subject to standard closing requirements including regulatory and stock exchange approvals, by the end of July.

Why It's Important

The acquisition of SugarLeaf will allow Neptune to establish a U.S. hemp extract supply chain. The company will get a 24,000 square foot facility that specializes in cold ethanol processing and has a capacity of 1.50 million kilograms of hemp. SugarLeaf also has strong relationship with local farmers and consumer product companies.

Following the legalization of hemp on a federal level in the U.S., the market is rapidly evolving. Some analysts predict the U.S. hemp CBD market could hit $22 billion by 2022.

"SugarLeaf's capacity, efficient production of high-quality extracts, and strong supplier relationships, combined with our existing competencies in customer relationships and science-based formulations, creates a strong value proposition to U.S. brands who want to offer differentiated products to consumers," said Jim Hamilton, President and CEO of Neptune.

Neptune's stock traded lower by 2.7 percent at $4.06 per share at time of publication.

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