Little Green Pharma Ltd (ASX: LGP) has announced it intends to demerge the ownership of its psychedelics business, Reset Mind Sciences Limited, from the LGP Group.
In conjunction with the Demerger, Reset also intends to undertake an entitlement offer to LGP shareholders to fund its operations.
LGP management saidthere is an increasing body of research globally into the use of psychedelic medicines, most notably psilocybin and MDMA, to treat various chronic mental health conditions.
To date, this global research has produced highly encouraging results and has catalysed the development of a significant global medicinal psychedelics industry, particularly in North America and the United Kingdom. The psychedelics industry is now gaining significant momentum in Australia which includes support from the Australian Government for medicinal psychedelics research through a $15m grant programme awarded in January 2022.
In late 2020, the company entered the psychedelics space given its logical fit with LGP’s long term stated goals of solving real patient problems and transforming lives, as well as LGP’s existing regulatory platform and expertise in cultivating and manufacturing Schedule 9 herbal drugs. The strategy also aligned with LGP’s record of being a pioneer in emerging Australian pharmaceutical industries.
Since its formation, Reset has made significant progress in the field of psychedelics and LGP believes its shareholders’ best interests are now served by demerging the subsidiary to allow it to pursue its strategy as a standalone company. This will give new and existing shareholders the freedom to dictate their preferred investment appetite across the two industries.
Post-Demerger, LGP will provide Reset with ongoing operational support and product supply, including exclusive access to the company’s Schedule 9 licensed West Australian cultivation and production facilities. Reset is currently investing in the expansion of LGP’s facilities to include specialist mushroom cultivation capability.
As part of the Demerger, LGP shareholders are expected to receive a pro rata allocation of 100% of the shares in Reset and a pro-rata offer to participate in a Reset entitlement offer, with further details to be provided in due course.
Post-Demerger, Reset will focus solely on developing its psychedelics business with the aim of being at the forefront of the psychedelics industry in Australia.
Next steps
LGP will shortly convene a general meeting of shareholders to seek approval for the Demerger. The notice of meeting will summarise Reset’s business strategy, the advantages and disadvantages of the Demerger, terms of the entitlement offer, key risk factors, and key dates for the proposed Demerger.
Subject to LGP shareholder approval, as well as satisfactory ASX and other regulatory approvals, LGP will then distribute 100% of the Reset shares on issue via an in-specie distribution to eligible LGP shareholders pro- rata to their shareholding held in LGP as at a record date within the June quarter.
The company has also engaged with the Australian Tax Office (ATO) to confirm the expected CGT rollover relief tax treatment arising from the Demerger, however, LGP and Reset may elect to complete the proposed Demerger prior to receiving definitive advice from the ATO.
Canaccord Genuity (Australia) Limited has been appointed as capital markets adviser to the Demerger.
We have invested significant effort investigating and advancing Reset’s psychedelics operations throughout 2021 and believe it is now at a point where it is best placed to grow as a standalone business,” LGP’s CEO, Fleta Solomon, said.
“We are confident the Demerger will allow for both Reset to drive its psychedelics strategy and LGP to focus solely on its medicinal cannabis business. We believe the Demerger rewards LGP shareholders for Reset’s progress to date and allow them to participate in its exciting future.”