Village Farms acquires CBD giant Balanced Health Botanicals in US$75M deal
17 Aug 2021 --- Village Farms International acquired one of industry’s largest cannabidiol (CBD) brands, Balanced Health Botanicals, in a transaction valued at US$75 million. The acquisition provides immediate access to the US retail CBD market, estimated to grow to US$16 billion by 2025, up from US$4.7 billion in 2020, according to cited estimates.
“Village Farms, like Balanced Health, views the cannabinoid space as an extension to the high-THC cannabis market. The addition of Balanced Health provides us with another pathway to participate in the US high-THC cannabis market when permitted to do so,” Michael DeGiglio, CEO of Village Farms International tells NutritionInsight.
“That’s in advance to our plans to convert our more than 5.5 million square feet of high-tech greenhouse facilities in West Texas for large-scale cannabis production, again subject to applicable laws and stock exchange rules.”
Additionally, the acquisition will immediately accretive to net income with a purchase price of US$75 million satisfied through US$30 million in cash and common shares of the company equal to US$45 million to Village Farms.
Geared toward expansion
Balanced Health owns and operates one of the largest brands in the hemp-derived CBD market in the US. This provides Village Farms with immediate entry into the US CBD market in a consumer products category adjacent to the high-THC cannabis market, as well as the broader consumer packaged goods (CPG) wellness arena.
Balanced Health has established a diverse portfolio of CBD and other cannabinoid products, including ingestible, edible and topical applications.
“We see the combination of Village Farms and Balanced Health building on their top-five brand and market shares, with the potential down the road for us to transition Balanced Health to a vertically integrated operation,” adds DeGiglio.
“With the anticipated regulatory changes in the US, as well as clarity from the FDA around uses and labeling, will come the opportunity for CBD to move well beyond the current limitations, opening the category up to a much broader consumer base.”
To illustrate this further, following new dietary ingredient notification rejections, the hemp industry in the US is calling for a better regulatory framework.
The acquisition adds product categories in the US adjacent to Village Farms’ consumer products portfolio, with potential expansion across cannabinoid products as permissible under currently evolving legislation.
It is also expected to contribute annualized sales of more than US$30 million at an annualized adjusted EBITDA margin of more than 15 percent in 2022.
Bringing change to the CBD industry?
The CBD market is a fairly nascent industry as its products became federally legal in 2018, with much development and maturation anticipated in the years to come. These developments include the expectation of favorable regulatory developments, comments DeGiglio.
“The acquisition also fits with our international plans,” he adds. “Our first overseas target is the Asia Pacific, where we have an investment in Altum International, which is targeting legal CBD throughout the region, and we can certainly see synergistic opportunities here.”
“We are also targeting Europe, and Balanced Health provides us with industry and product expertise we did not have previously.”
The acquisition of Balanced Health Botanicals will help Village Farms to expand globally in the CBD sector.
Among recent key acquisitions in the CBD space this year, Kadenwood acquired UK-based cannabidiol wellness brand Healist Advanced Naturals to help normalize CBD. Royal DSM formed a partnership with Mile High Labs, a cannabinoid ingredients manufacturer, last June. Earlier this year, MaxVera Wellness partnered with Nebo Manufacturing and Intermountain Nutrition, which focus on CBD products primarily.
“In light of favorable regulatory change, we expect to leverage their leading brand, and diverse product portfolio for the expected expansion of CBD sales into major CPG retailers,” comments DeGiglio.
“We view Balance Health platform as an additional pathway to the high-THC cannabis market in the US, and we believe the knowledge and capabilities of the Balanced Health team can be a meaningful contributor to Village Farms’ international plans in selected high-growth CBD markets.”
CBD is on the rise despite regulatory issues
Industry players have been outwardly voicing the potential of CBD amid a murky regulatory climate. The need for improved oversight for commercialized cannabis- and hemp-derived ingredients has been flagged as the demand for these solutions continues to rise.
Last July, wellness brand Fourfive urged the UK’s regulatory organizations to conduct clinical trials on CBD and medical cannabis use in professional sports.
By Nicole Kerr
