In yet another huge dagga deal, major SA cannabis companies ink a R650 million merger

Business Insider SA
Goodleaf cannabis south africa
  • Goodleaf, which opened South Africa's first legal commercial cannabis store in 2019, is merging with a Lesotho-based grower.
  • The deal, said to be worth around R650 million, is aimed at expanding Goodleaf's export market.
  • This latest deal follows a flurry of developments in South Africa's cannabis sector, with government readying a "master plan" and a JSE-listed firm investing in plants and "smokables".
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One of South Africa's first commercial cannabis brands, Goodleaf, has merged with Highlands Investments in a deal they value at approximately R650 million. The newly-announced partnership follows several high-profile developments in South Africa's cannabis industry, with neighbouring Lesotho playing a vital role.

Less than a year after the Constitutional Court decriminalised the personal, private use of cannabis, South Africa's first legal, commercial CBD store was opened in the centre of Cape Town in May 2019. Goodleaf, which focuses exclusively on selling and marketing Cannabidiol (CBD) products – as opposed to Tetrahydrocannabinol (THC) which has heightened psychoactive properties – has since opened another store in Cape Town and one in Johannesburg.

It's portfolio of more than 30 CBD products includes oils, vapes, skincare products, water-soluble sachets, and beverages which are all sold in stores and online.

Highlands Investments, which was formerly owned by Canada's Canopy Growth Corporation, has a foothold in Lesotho and was one of the first companies to be awarded a commercial cultivation license by the government in 2017.

Highlands has traditionally invested in grow operations, exporting medical-grade CBD and THC to Australia, Europe, the Middle East, and South Africa where the raw cannabis flower is processed into commercial products.

More than R470 million has been invested in Highlands' two cultivation facilities in Lesotho. The Kolojane facility produced its first 11-hectare crop in 2020. The 9-hectare facility located near Maseru's airport has produced nearly 350kg of high-quality THC since 2019.

"Consumers are increasingly looking for a seed-to-shelf solution where they have a deep understanding of the quality of products and the source of origin that they are putting into their bodies," says Warren Schewitz, the founder and chief executive officer of Goodleaf, in detailing the merger with Highlands Investments.

"As we continue to scale, it's imperative that we have access to a high-quality, reliable [and] low-cost source of supply that we can integrate into our supply chain for global exports. Highlands has an excellent reputation in producing high-quality, low-cost flower… the growing conditions are pristine and the regulatory environment in Lesotho is very progressive."

The partnership will see Highlands' shareholders own 35% in the merged entity, with Goodleaf the majority shareholder at 65%.

This mergerncomes after a string of similar developments in the sector, coinciding with the drafting of “cannabis masterplan” which proposes regulatory reprieves. The department of agriculture, land reform and rural development aims to increase South Africa's capacity for local production and foreign export in an industry estimated to be worth R27 billion by 2023.

Labat Africa, a JSE-listed holding company, recently offered R11.25 million for a 75% stake in Leaf Botanicals. Leaf is one of the few local companies to hold a cannabis production license awarded by the South African Health Products Regulatory Authority (Sahpra).

Labat also recently partnered with American company Ace and Axle to produce and sell “CBD smokables” in South Africa.

A Lesotho-based cannabis cultivator, MG Health, was recently granted good manufacturing practice (GMP) approval which allows medicinal cannabis flower to be exported to the European Union as an active pharmaceutical ingredient (API). MG Health said it was keeping a close eye on developments in South Africa and "hoped to see restrictions" eased to stimulate entry into the local market.

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