Scythian Expands into Colombian Cannabis Market

As international opportunities for Canadian cannabis companies continue to expand in various countries, a research-focused company of cannabinoid-based therapies has officially announced its plans to enter the Colombian market.

On Monday (April 9) Scythian Biosciences (TSXV:SCYB; OTCQB:SCCYF), unveiled its intentions to acquire MMJ Colombia Partners, a company embedded in the medical cannabis market for Colombia currently expanding that footprint.

Following completion of the deal, Scythian will be the sole shareholder of MMJ Colombia and MMJ’s most recent acquisition in process. MMJ Colombia is taking steps to acquire 90 percent of the issued and outstanding shares of Colombian company ColCanna.

The terms of this acquisition make it dependant on the completion of MMJ Colombia’s acquisition of ColCanna and to fully acquire Colombian licenses for the cultivation, production, research, and export of medical cannabis CBD and THC extracts.

“With a climate that allows four harvests a year, we can now expand our production, research and retail of the highest quality cannabis products in Colombia and the world,” Jonathan Gilbert, Scythian CEO said.

As part of the acquisition, Scythian also detailed a variety of considerations, including an advance of US$1.2 million of the purchase price in cash, once receiving ColCanna’s final licenses. According to its announcement, Scythian will also:

Issue on the closing date CDN$32,000,000 of common shares in the capital of Scythian (the “Common Shares”) at an issue price equal to the volume weighted average price of the Common Shares over the 20 trading days prior to the closing date of the Acquisition, provided that no less than 1,570,000 Common Shares will be issued as share consideration.

Scythian will also issue US$5 million of non-interest bearing, unsecured promissory notes due at specific dates all throughout 2018 and into next year.

As previously reported by the Investing News Network (INN) the Colombian cannabis market has provided an option of growth for companies raising funds through the Canadian stock exchanges.

Alvaro Torres, president, and CEO of Khiron Life Sciences–a company seeking to offer its stock in Canada–told INN the Colombian market is too attractive for other producers to let go.

“In the end, we have to look for bigger markets and all the LPs (licensed producer) are looking at the way that they can continue opening up their well-known strategies and well-known cultivation activities into a market that is just opening up, which is Colombia,” Torres said.

“As more countries legalize cannabis for medicinal use, Colombia is positioned to become a dominant supplier to these new countries as they ramp up their own domestic production capacity,” Ryan Douglas a cannabis growth consultant told Marijuana Business Daily.

In an interview with INN, Neil Closner, CEO of MedReleaf (TSX:LEAF) previously said he believes the international market for medical cannabis is the biggest option available for medically focused companies.

“[T]here are a lot of countries that are advancing legislation to legalize medical cannabis… and many of those countries are more medically focused and medical rigorous than even Canada is today,” he said.

Closner added the countries he references already have cannabis covered for medical purposes as part of their insurance coverage.

Investor takeaway

It will be key for Scythian shareholders to watch on the development of ColCanna’s acquisition by MMJ Colombia and the status of the licenses for the local company as a deal fallout has proven to sour the markets.

As of 3:07 p.m. EST on Monday, Scythian’s share price on the TSX Venture exchange declined 10.55 percent. The company is currently valued at C$16.28 per share.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.