While the U.S. government is catching up with mergers and acquisitions regulations, cannabis companies such as World High Life PLC (NEX: LIFE) and GreenStar Biosciences Corp. (CSE: GSTR) already profit from their investment agreements.
The American cannabis industry is highly fragmented, while at least six mergers are still awaiting evaluation by the Department of Justice. This is ironic because there is no risk that a cannabis cartel will be created in the near future. It is also one of the main reasons why many American cannabis companies have seen their profits fall by about 40-50 percent compared to the record results reached earlier in 2019.
However, the delays in making assessments by the Department of Justice are probably due to the fact that the government is trying to keep up with the emerging industry and not to the fact that officials are actually concerned about the possibility of a monopoly.
People from the industry comment on the Department’s lack of assessments and the consequent closure of companies as follows: “If you made an agreement regarding plastics, the government has databases for each company and all the necessary data. If you come in with cannabis, they have no idea how big your company is and what you do for a living”.
According to analysts, lack of a rating does not allow many investors to make a particular move. “We believe, however, that the risk of the Department taking a firm stance on M&A in antitrust matters is low, given the emerging and disaggregated nature of the sector due to the continuing federal ban,” commented one of them.
However, the Department of Justice is expected to approve bids as early as next month and Cresco’s proposed acquisition of Origin House is expected to be the first to take place.
But even in a fragmented cannabis market in the U.S., companies are open for investors and creating partnerships with each other. This is the case with Cowlitz, a Washington state-based producer, marketer and distributor of recreational cannabis, that became a state leader thanks to its partnership with GreenStar Biosciences Corp. (CSE: GSTR), a Canadian investment company. With their support, Cowlitz recorded revenue of $14.6 million in 2018 in just five years of operations.
GreenStar is acquiring a diverse portfolio of top cannabis and CBD companies in North America. They want to be one of the key players in the sector and an attractive stock for investors. Recently they set up a joint venture with Progressive Herbs Inc. called Capri. Capri is in possession of a license for a new patent-pending cultivation technology that allows growing cannabis plants faster, cheaper and with the highest THC level on the market.
In Europe, where cannabis is legal for medicinal use only in most countries, companies seem to have similar strategies to GreenStar’s. World High Life PLC (NEX: LIFE) is an investment company that plans to create a portfolio of the most promising cannabis and CBD companies in Europe. Recently, World High Life proposed a deal to Love Hemp Ltd., offering to acquire all their shares for 9 million GBP. Love Hemp is UK’s leading CBD company. Their products are present in over 1200 locations in the country and network stores such as Boots, Sainsbury’s Superdrug and Tesco. Together with Love Hemp, World High Life is planning to enter other European markets, such as Germany in 2020.
