On March 23rd2020, Charlotte Web announced, via their website, one of the most relevant mergers ever seen in the CBD industry. According to the statement, the company, specialized in hemp-based wellness products, reached an agreement with Abacus Health Products (the parent company of CBDMedic) , one of the market leaders for topical CBD-based products. The merger, whose completion is expected by the end of the second quarter of 2020, will lead Abacus Health Products’ shareholders to own 15% of Charlotte Web. According to the current market value of Charlotte Web’s shares on the Toronto Stock Exchange, the transaction stands for a C$99 million equity.
According to the statement on the company’s website, “For Charlotte’s Web the combination benefits from the current U.S. regulatory environment which favors topical- CBD products within the food/drug/mass channel. For Abacus, the acquisition provides the advantages of joining an established and industry leading platform and benefiting from leading CPG management and brand equity with a low-cost vertical supply chain.” This joining of forces represent, in numbers, more than 34% of the current U.S. CBD-based products retail market in the U.S.A. The numbers of the combined sales of the two companies, $29,1 million as for the first quarter of 2019, make for good expectations on behalf of investors.
As for the mutual advantages, going beyond mere numbers, there is surely more than a handful to be reaped for both companies. First, thanks to the constitution of this joint-venture, Abacus will be able to rely on Charlotte Web’s high quality hemp extract for all their product portfolio. Secondly, in light of Abacus’ ownership of the Harmony Hemp Brand, (acquisition that took place on February 20th, 2020) Charlotte Web boosts their reach in the personal and skin care market, and set foot even more firmly in the European CBD market, where Harmony has garnered a pretty solid positon in the last few years. Another aspect to take into account is the benefits deriving from merging both companies’ customers and channels which gives Charlotte Web’s access to the 16500 medical practitioners Abacus works wit. And, of course, the fact that Abacus is now enabled to utilize Charlotte Web’s vertically integrated supply chain, as well as exploiting Charlotte Web’s proprietary cultivars and their new state-of-the-art laboratories, in order to further provide innovative solutions in the field of wellness.
According to the press release, the CBD topical segment is expected to become the largest and fastest growing one of the market by the year 2021. The catalogue expansion Charlotte Web secured with this acquisition implies, therefore, a larger and greater reach for the company’s products, and a further expansion within their field of expertise, the CBD-skincare retail market. Moreover, Charlotte Web is now able, thanks to the pre-existing Abacus partnership, to enter the sports sector as a VIP.
In regards to this merger, Deanie Elsner, Charlotte Web’s CEO, commented enthusiastically that “The complementary strengths of our relative market positions made this merger a logical strategic move. With this acquisition we strengthen the business to reflect the evolution of the category. Because most of Abacus’s products are positioned in adjacent categories, our combined distribution reach has limited shelf overlap. Together we are the most developed CBD company across every channel and segment and positioned to accelerate our growth and extend our market share.”