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Rua to issue new shares to buy medicinal cannabis company for $10m

Tairāwhiti-based Rua Bioscience intends to buy a fellow medicinal cannabis company for $10m.

NZX-listed Rua entered into an agreement to acquire 100 percent of Zalm Therapeutics Limited, a New Zealand-based medicinal cannabis company, which has Australia's leading listed medicinal cannabis company, Cann Group, as one of its key shareholders and partners.

Rua is acquiring Zalm for $10m equity value through the issue of new Rua shares at approximately $0.41 per share. Rua anticipates completing the acquisition in late January 2022, subject to necessary Rua shareholder approval.

“Combining speed to market with long-term preferential access to substantial volumes of competitively priced product will enable the company to build a meaningful market presence faster and with a greater economy of scale than our current capacity, or that of any other New Zealand medicinal cannabis company,” Rua chairman Trevor Burt said.

“This will significantly de-risk our business and reduce pressure on revenue.”

If approved by shareholders, Rua would acquire Zalm's third party supply contract for GMP-grade medicinal cannabis with Cann, including exclusive supply into New Zealand.

Cann is in the final commissioning phase of one of Australasia's largest and most technologically advanced indoor growing facilities at Mildura, Victoria.

The agreed purchase value will be satisfied through the issue of new Rua shares at approximately $0.41,with $3.3m paid on completion and remaining consideration paid in equal instalments ($3.3m) conditional on Zalm achieving critical production, pricing and regulatory milestones.

Rua would ultimately issue 24,420,0001 new Rua shares to Zalm shareholders — $1m of Zalm cash is available to Rua immediately on settlement, with about $500,000 held in escrow pending achievement of at least one of two milestones.

Rua chief executive Rob Mitchell said the deal would allow Rua to supply patients with two unique brands — Rua, a locally-produced, premium oil and flower produced in New Zealand; and Zalm's Australian-grown oil and dried flower.