Kanabo (KNB.L), the first cannabis business to IPO on the London Stock Exchange, signed a deal with Hellenic Dynamics, which has a 200,000 square meter growing facility located in Northern Greece.
As per the deal, Kanabo will purchase up to 1,000 kg per year of cannabis flowers, subject to regulatory approvals, for extraction of medical standard oils.
In order to “cement the relationship”, Kanabo has acquired an interest of over £750,000 ($1.1m) worth of shares in Hellenic, reflecting a desire of both parties “to see this investment as part of a broader potential relationship”.
Avihu Tamir, CEO of Kanabo, said: "The MoU with Hellenic Dynamics and the subsequent investment is part of Kanabo's strategy to quickly grow its core business whilst pursuing complementary, synergistic, acquisitions and investments in the medical cannabis space, leveraging our position as a quoted company."
"We welcome the enthusiastic support of investors for our approach.”
Hellenic said it wants to grow genetically unique 'tetrahydrocannabinol' (THC) – a dominant strains of dried medical cannabis flowers and flower extracts – for export into the medical cannabis market in Europe.
The market was worth €4.1bn (£3.5bn, $5bn) in 2019 and is expected to reach €43.3bn by 2027, the company said in a statement.
It said its first medical cannabis flowers are expected to be cultivated in the third quarter of 2021, with commercial sales expected to occur in the last quarter. It wants to then expand its cultivation area in phases, in line with European demand.
Hellenic recently announced plans to list on the London Stock Exchange. The listing is expected in the near-term.
Earlier this year, Tamir had said he believes the UK can become a hub for the fast-growing industry in Europe.
“There’s no doubt that this is a huge industry, there’s no doubt that it’s bringing a lot of jobs and taxes," he had told Yahoo Finance UK.
"Now the question is if the UK has an opportunity to lead the path in Europe? I think the answer here is easy as well. There’s no leader for medical cannabis in Europe. The potential is huge."
Shares in Kanabo were down 1.3% late Tuesday afternoon in London.