Charlotte’s Web is making an acquisition that will give it a big edge in the food/drug/mass CBD market. The Boulder, Colo.-based company is acquiring Abacus Health Products, which markets the CBDMedic and CBD Clinic brands. The transaction is expected to give the company roughly 34.7% market share in the FDM channel.
The deal will see Charlotte’s Web offering a total equity consideration of $99 million in stock. Abacus shareholders will receive 0.85 of a common share of Charlotte’s Web per Abacus share. Charlotte’s Web said the deal, by combining its CBD wellness products and Abacus’ OTC topicals, will make it the world’s largest vertically integrated CBD company.
"The complementary strengths of our relative market positions made this merger a logical strategic move," said Deanie Elsner, CEO of Charlotte's Web. "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. Furthermore, it enables us to drive more scale production through our vertically integrated infrastructure."
Abacus Health's retail brand CBDMedic
Combined sales for the new company were $29.1 million for the third quarter of 2019. Currently, Abacus distributes more than 50 SKUs across 12,000 doors and 16,500 healthcare practitioners. The addition to Charlotte’s Web gives the company an immediate expansion in topicals and in retail skin care. It also adds a foothold in the personal care and beauty segment that Abacus gained through its February acquisition of Harmony Hemp. Overall, the company expects for its food retail market share to reach 23% through the transaction, which also will boost its drug channel share to 43.5%.
"This transaction provides a unique opportunity to our shareholders and employees to participate in the compelling potential of the combined businesses," said Perry Antelman, CEO of Abacus. “Abacus is one of the largest suppliers and distributors in the United States of topical products infused with hemp extract to the F/D/M and healthcare practitioner markets. By joining with Charlotte's Web, we have the opportunity to maximize our growth by leveraging the Company's leading brand, vertical integration, infrastructure, expertise, financial position and capital markets presence, and position the combined Company to deliver benefits for our stakeholders over the long-term.”
The acquisition still is subject to approval by abacus shareholders, who have been encouraged by the Abacus board of directors to vote in favor of the transaction at an upcoming special meeting that will be convened after regulatory and court approvals, as well as other closing conditions, have been completed.