SmallCapPower | January 31, 2018: Emerald Health Therapeutics Inc. (TSXV:EMH) and Namaste Technologies Inc. (CSE:N) announced on January 30, 2018, that the two companies have signed a letter of intent (LOI) whereby Emerald Health and Namaste Technologies have agreed to collaborate with each other on international expansion opportunities and develop a fully-integrated e-commerce platform to serve as a retail channel for Emerald's patients. Under the terms of the LOI, Emerald Health will enter into medical cannabis Supply Agreement with Namaste's wholly-owned subsidiary, Cannmart Inc, whereby Emerald would supply the medical cannabis to Cannmart.
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Cannmart is a late stage ACMPR applicant that has a "sales-only" platform. It intends capture the Canadian medical cannabis online-retail industry by collaborating with licensed cannabis producers and selling them on its platform.
Synergies from such a vertical integration move would be interesting. Emerald Health can take advantage of Namaste's existing consumer databases, site traffic and e-commerce technology for marketing purposes in return Emerald Health can provide expertise in pharmaceutical and biotech for developing medical cannabis tailored to specific markets and patients. Through the e-commerce platform Namaste Technologies would make available its full product catalogue of over 1000+ cannabis delivery devices to Emerald Health. This vertical integration between both the companies are expected to drive incremental sales going forward.
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Emerald Health cited Namaste's online marketing tools and expertise, large and growing customer base, and array of cannabis delivery products as reasons for entering into this letter of intent. The goal would be to develop a vertically-integrated platform.
Post the necessary approvals from the stock exchanges, Namaste Technologies would receive 500,000 warrants of Emerald Health and Emerald Health would receive 500,000 warrants of Namaste Technologies.
Emerald Health trades at a price to book multiple of 17.75x and Namaste Technologies trades at a price to book multiple of 47.24x.
Disclosure: Neither the author nor his/her family own shares in any of the companies mentioned above.
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