Little Green Pharma (ASX: LGP) is turning heads in the medicinal cannabis space with its proposed acquisition of Health House Australia Pty Ltd. In an ASX release dated 20 December 2024, the company unveiled its exclusive Letter of Intent (LOI) to purchase the cashflow breakeven distributor, marking a strategic leap toward vertical integration and enhanced market presence.
The deal at a glance
The acquisition is valued at $1.25 million on a cash-free, debt-free basis. Little Green Pharma has secured exclusivity until 31 January 2025 to conduct due diligence and negotiate a binding agreement. In exchange, the company will pay a non-refundable deposit of $50,000 and a refundable deposit of $25,000, which will go toward the final purchase price if the deal proceeds.
Health House, a pioneer in the Australian medicinal cannabis sector, generated approximately $7.5 million in annualised revenue in 2024. The company’s robust distribution network and operational efficiency align perfectly with Little Green Pharma’s growth strategy.
Strategic fit and operational synergies
Little Green Pharma CEO Paul Long sees the acquisition as a transformative step. “By integrating Health House’s operations with our existing capabilities, we can unlock significant synergies and deliver even greater value to our patients and stakeholders,” he said.
Little Green Pharma CEO, Paul Long
The deal promises to enhance vertical integration, streamlining the supply chain from cultivation to patient delivery. This integration could drive cost efficiencies while allowing Little Green Pharma to leverage Health House’s established network to scale its operations. The acquisition also supports the company’s commitment to ethical and sustainable growth while continuing partnerships with other premium cannabis brands.
Strengthening financials and market reach
Little Green Pharma’s operational momentum has been strong, with revenue from ordinary activities increasing by 36.8% year-on-year to $17.5 million for the half-year ended 30 September 2024. The company also achieved a positive operating cash inflow of $738,000 during this period—a marked improvement from the $1.8 million cash outflow in the prior year. This acquisition is expected to bolster LGP’s revenue base further and enhance its cashflow profile.
Health House’s distribution infrastructure and expertise will not only expand LGP’s reach but also align with its long-term strategy of geographic and product diversification. Internationally, Little Green Pharma has already made strides in markets such as Germany, France, and the UK. Adding Health House to the mix strengthens its foothold in the Australian market, where medicinal cannabis adoption continues to grow.
A pioneering legacy
Founded as the first Australian company to import medicinal cannabis in 2017, Health House has built a reputation for reliable distribution and operational excellence. Operating from a state-of-the-art facility in Western Australia, the company collaborates with leading producers to supply premium-grade medicinal cannabis products.
Looking ahead
This acquisition is more than a financial transaction; it’s a strategic alignment of expertise, infrastructure, and vision. The combined capabilities of Little Green Pharma and Health House promise to set a new standard for patient care and industry leadership in the medicinal cannabis space.
With due diligence underway and a binding agreement expected by the end of January 2025, all eyes will be on Little Green Pharma as it prepares to finalise this transformative deal. Should the acquisition proceed, it will not only enhance operational synergies but also position the company to capitalise on emerging opportunities in a rapidly expanding global market.
As Paul Long aptly put it, “This partnership marks an important step towards increasing our vertical integration in support of sustainable growth.” If executed successfully, Little Green Pharma could redefine its place in the medicinal cannabis ecosystem, delivering value across the board.
