Why ASX hemp share Elixinol's (ASX:EXL) share price is moving higher

The Elixinol (ASX: EXL) share price leapt 15% higher on open this morning. We look at the ASX hemp share's acquisition announcement.

Bernd Struben

Author bio Bernd Struben earned his BA in economics from the University of Michigan in 1991, with post-graduate studies in environmental economics at the University of Connecticut. Over the years he’s written about and analysed the tourism industry in the Caribbean; Europe’s commercial real estate markets; and, since moving to Australia in 2010, global and Aussie share markets. Bernd studies geopolitical and macroeconomic trends, alongside sector and company specific data, to gauge what he believes could be tomorrow's best investments. In his free time, you might find Bernd at the beach with his family or working on his next science fiction novel. Areas of expertise Australian and global share markets Macroeconomic and geopolitical trends Real estate Education Economics, University of Michigan Favorite investment quote "The four most dangerous words in investing are: 'This time it's different." — Sir John Templeton

Published March 15, 2021 11:42 am AEDT

The Elixinol Global Ltd (ASX: EXL) share price rocketed 15% on open this morning and is currently up 5% in intraday trading.

This comes after the ASX hemp company revealed it would acquire a leading German cannabidiol (CBD) company.

Elixinol shares were placed in a trading halt on 4 March at the company's request, pending this announcement. Shares started trading on the ASX again this morning.

range of hemp oil and skin products representing elixinol share price — Image source: Getty Images

What did Elixinol report on its acquisition agreement?

The Elixinol share price is moving higher after the company reported it would acquire CannaCare Health GmbH.

CannaCare owns CANOBO, which is among Germany's top CBD brands with a dominant position in Germany's drugstores. CANOBO has more than 4,500 physical retail distribution points, and its 20 products include CBD oils, sprays and skincare.

In the 2020 financial year, CannaCare reported 2.6 million euros (AU$4 million) in revenue with earnings before interest, taxes, depreciation and amortisation (EBITDA) breaking even.

Elixinol noted that Germany's CBD market was expected to grow faster than any other in Europe. The compound annual growth rate (CAGR) of 47% or more is forecast to reach US$600 million by 2025.

The agreement stipulates Elixinol will pay 9 million euros upfront, with 3 million euros in cash and the other 6 million euros in Elixinol shares.

The company reported that "upon attainment of FY2021 revenues of 12.9 million euros and 20% EBITDA, the maximum earn-out of 15.0 million euros is payable in Elixinol shares, making a total potential consideration of 24.0 million".

Management commentary

Commenting on the binding agreement, Elixinol global CEO Oliver Horn said:

We are incredibly excited about this transformational opportunity which leapfrogs Elixinol closer to its vision of becoming a profitable, global, hemp-derived consumer goods wellness business…

By acquiring CannaCare, we gain a strong foothold in Europe's fastest growth market of Germany and, together with our established UK business, will become a leading pan-European business of scale.

Completion of the agreement remains subject to all the standard conditions.

Elixinol share price snapshot

Over the past 12 months, Elixinol shares are down 18%. That compares to a 38% gain on the All Ordinaries Index (ASX: XAO).

Year-to-date, the Elixinol share price is up 14%.

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