Stem Holdings Inc. agreed to purchase South African Ventures Inc. in a deal expected to close on or about March 29.
The purchase consideration is expected to be 8,250,000 common shares of Stem, valued at approximately C$19 million based on its closing trading price on March 21.
South African Ventures has a joint venture with Profile Solutions Inc., which makes and distributes cannabis products through its Elite Products International Inc. subsidiary. The target company has a working capital of approximately C$11 million. South African Ventures owns a 49% stake in the joint venture, with the remainder owned by Profile Solutions.
The joint venture has secured preliminary approval to operate a farm and processing plant for medical cannabis and industrial hemp in The Kingdom of eSwatini, formerly known as Swaziland, for at least 10 years. It will be the exclusive global exporter of medical cannabis and hemp products in eSwatini.
The eSwatini facility will rise on 2,500 acres at The Science Park Matsapha. The venture will fund the estimated $7.0 million construction cost of the facility using cash on hand and other non-dilutive sources of financing. The facility is expected to break ground in the second quarter and be finished in the fourth quarter.
Golan Maimon, former Israeli Chief of Military police, will handle the security plans and operations for the eSwatini facility.