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Zelira Therapeutics Ltd to acquire Health House

Key highlights:

  • Health  House  International  Limited  has  signed  a  binding  term  sheet  with  Zelira Therapeutics Ltd for Zelira to acquire Health House
  • Agreement  is  conditional  upon  Zelira’s  completion  of  satisfactory  due  diligence  on  Health  House  and  the  parties  entering  into  a  formal  Scheme  Implementation Deed, amongst other standard conditions.
  • The acquisition will be undertaken by a Scheme of Arrangement pursuant to Part 5.1 of the Corporations Act 2001 (Cth).
  • Zelira  has  agreed  to  provide  a  $1.5  million  loan  facility  to  Health  House to assist with its working capital requirements prior to implementation of the Scheme.
  • CPS acting as corporate advisor for Health House

Health  House  International  Ltd  (ASX:HHI)  (Health  House  or  the  Company),  an  international  pharmaceutical  distributor  specialising  in  the  distribution  of  medicinal  cannabis  products  across  Australasia,  the United  Kingdom  and  Europe,  is  pleased  to  announce that it has entered into a binding term sheet with Zelira Therapeutics Limited(ASX: ZLD) (‘Zelira’), under which it is proposed that Zelira will acquire 100% of the shares in Health House by way of a Scheme of Arrangement to be undertaken by Health House (the  ‘Scheme’). 

The  Scheme  will  be  subject  to  shareholder  and  Court  approval  in  accordance with the requirements of Part 5.1 of the Corporations Act 2001 (Cth).

Under the Scheme, Zelira will issue shares to Health House shareholders giving Health House parties a 19.45% interest in the expanded capital of Zelira.The proposed merger of Health House with Zelira will create a global organisation with strong medicinal cannabis product and distribution capabilities.

Zelira   is   a   leading   global   biopharmaceutical   development   and   commercialization   company   marketing   cannabinoid-based   medicines.   Zelira   owns   a   portfolio   of   proprietary revenue-generating  products  and  a  pipeline  of  candidates  undergoing  clinical  development  that  are  positioned  to  access  the  world’s  largest  and  fastest-growing markets.  

Zelira  is  focused  on  developing  and  clinically  validating  branded  cannabinoid-based medicines for  the  treatment  of  a  variety  of  medical  conditions  in  its  Rx  business,  including  insomnia,  autism  and  chronic  non-cancer  pain  as  well  as  offering  over-the-counter (OTC) products.  

Zelira  is  also  generating  revenue  in  Australia  and  Germany  from  its  proprietary  and  patented  Zenivol®  –  a  leading  cannabinoid-based  medicine  for  treatment  of  chronic  insomnia.  

Zelira has partnered with SprinJene® Natural to develop and commercialise natural and organic oral care products under the SprinjeneCBD brand, as part of Zelira’s OTC business.

CPS Capital Group Pty Ltd is acting as Health House’s corporate advisor for the proposed merger.

Health House Founder & Chairman David Wheeler said: “The proposed merger is a strategic vertical opportunity to increase margins and save costs given:

  • Health House currently distribute Zelira’s Rx formulations in Australia and have an agreement in place to distribute the SprinjeneCBD toothpaste in the United Kingdom. 
  • Manufacturing  to  be  completed  in  house  to  further  improve  margins  for  the combined groups products and providing stronger control of product life cycle. 
  • Zelira’s  research  team  and  Health  House’s  European  based  Kalapa  Clinic  will  provide an opportunity to materially improve the speed at which these products can obtain clinical validation, while improving the cost of such clinical trials. 

The $1.5 million short-term loan facility assist Health House with its short-term working capital requirements.”

Structure of proposed acquisition

Zelira and Health House have executed a binding term sheet pursuant to which they will undertake the steps required to enter into a formal Scheme Implementation Deed (‘SID’), subject to satisfactory due diligence by Zelira on Health House.

The SID will be subject to the conditions precedent set out in Annexure 1.

Facility Deed

To  assist  Health  House  with  its  short-term  working  capital  requirements,  Zelira  has  agreed to provide a $1.5 million short-term loan facility to Health House on the following terms:

  • the maximum amount of the facility is $1.5 million and may be drawn down in a single drawdown or in a series of drawdowns.
  • The  facility  may  only  be  used  for  Health  House’s  short-term  working  capital  requirements.
  • The facility is unsecured.
  • The facility is repayable on the earlier of:
    • the date that Zelira and Health House agree after Health House becomes a wholly-owned subsidiary of Zelira as a result of the Scheme;
    • the date that is 2 months after the date the parties’ current confidentiality deed  between  the  parties  is  terminated  or  expires  without  the  SID  being executed; 
    • the date that is 2 months after the date the SID is terminated; andothe date that is 2 months after the Scheme is implemented.

Debt to Equity swapTo provide further support and reduce the working capital requirements of the combined group, Health House will seek shareholder approval for the issue of shares as repayment of approx. $1.5 million owing to CanPharma lenders (debt consideration shares), which shares will be Scheme shares for the purposes of the Scheme.  

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