Aphria Inc. (TSE: APH) announced the signing of a strategic partnership with Schroll Medical, a Danish subsidiary of the flower producer Schroll Flowers.
Schroll is one of the largest growers and distributors of hydrangeas in Europe.
The partnership will grow and distribute organic, GMP-certified cannabis throughout Europe.
Aphria is paying C$160,000 for a 15% stake in the partnership and has a legal mechanism to increase the stake to 50%.
Based on Schrolls future capacity of an estimated 3,000 kg, the deal was done at a reasonable price of C$0.36 per gram, compared to deals done in Canada at C$15-$50 per gram.
Aphria now has a global reach that rivals all of the largest producers in Canada.
Aphria has the local growing and processing capacity to supply the rapidly growing European market along with import flexibility provided by greenhouses and export permits in Canada, Jamaica, Africa, and soon Colombia.
No matter how or where cannabis demand develops, Aphria is well positioned to enter those markets quickly and at scale.
Schroll already owns a 30,000 sq. ft. organic greenhouse currently being retrofitted.
The greenhouse should produce at least 3,000 kg a year at full capacity.
A 3,300 sq ft processing facility is being built as well to turn raw flower into different types of concentrates.
Though this was not mentioned in the press release we think it’s likely Schroll has additional land available for future greenhouse expansions as market demand requires.
Demand in Germany, as an example, is currently 3,000 kg but is doubling every few months.
Terms of the Partnership
Aphria will act as a consultant to the partnership by consulting on GMP certification, cannabis genetics and strains, and proprietary growing IP.
Aphria’s German subsidiary will manage the partnership.
Aphria will also handle the worldwide distribution of medical cannabis produced by the partnership, mainly to other European countries.
Schroll already has solid distribution infrastructure in Europe with flower greenhouses located in Portugal and Denmark.
Schroll will be in charge of cultivating the organic cannabis before distribution.
Another Prudent Deal from Aphria
Aphria has managed to sign another deal that broadens its global reach without paying through the nose unlike most peers.
Denmark’s proximity to Germany, the fastest growing cannabis market in Europe, will allow Aphria to establish a regional cultivation and distribution hub that is well positioned to gain market share as the medical market opens in Europe.
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