Cannabis News Wire – Sugarmade, Inc. (OTCQB: SGMD), one of the largest publicly traded hydroponics supply companies moving into the industrial hemp space, is seeking to expand its portfolio with the acquisition of two hydroponic cultivation companies working in the lucrative cannabis space. Bringing the two companies into the Sugarmade fold “will not only significantly boost our top line revenue growth, but will expand our distribution across the most important sectors of the fast-growing cannabis marketplace,” Jimmy Chan, Sugarmade’s CEO, said in a news release (http://cnw.fm/y0PxD).
The company’s formal acquisition proposals target a profitable and cash-flow positive Southern California-based major supplier of hydroponic cultivation supplies to the wholesale sector and to large commercial cultivators. Under the terms of the proposal, Sugarmade would acquire the organization, which is producing in excess of $40 million of revenue per year, for a combination of cash and Sugarmade common stock. The second target is a Washington state-based retailer, which is also profitable and cash flow positive, producing approximately $5 million of revenue per year. Under the terms of the proposal, Sugarmade would issue common stock to acquire the retailer.
“In addition to the revenue growth opportunities, we will also be afforded very meaningful cost savings across many operational functions,” Chan stated in the release. “In particular, we believe there are strong cost synergies relative to manufacturing, purchasing, international transport, warehousing, and shipment to customers. Perhaps most exciting, however, is that these acquisitions will place us among the largest public companies in the booming cannabis sector.”
The global hydroponic market is expected to flourish over the next five years, reaching a valuation of more than $10 billion by the end of 2023, according to a report issued by KD Market Insights (http://cnw.fm/N0m2Q). Rising consumer demand for locally produced food and specialty crops such as cannabis and related cannabidiol (CBD) products, including those produced with industrial hemp, are expected to bolster profits. Regulatory changes in the United States, Canada and parts of Europe that favor the legalization of some form of cannabis are expected to provide significant opportunities for cannabis retailers and companies such as Sugarmade that provide essential supplies and services to the industry.
Sugarmade’s recent commitment of an investment of $1 million in capital over the coming year into Hempistry, Inc.’s ultra-high CBD industrial hemp cultivation project in Kentucky is seen as another strategic move, Chan said when announcing the project (http://cnw.fm/be1oT). An agreement to provide hemp cultivation supplies is expected to add additional revenues.
“Demand for industrial hemp and products derived from hemp is soaring, with no let-up in sight. We expect our direct investment into Hempistry to be accretive to common shareholders and our supply agreement to be lucrative. All of us at Sugarmade see a tremendous opportunity to become a supplier to this fast-growing sector,” Chan stated in the news release.