Barak Rosen, one of the controlling shareholders in Israel Canada, is expanding his cannabis investments in Israel. After announcing several months ago that he was leading an investment group in acquiring a controlling interest in cannabis growing company Cannabit, Rosen is now leading a NIS 17.5 million investment in stock exchange shell Herodium, into which Panaxia Israel, owner of a cannabis production plant and pharmacy, is about to be merged.
The investment in Cannabit by Rosen and his partners is scheduled to get underway in the coming weeks, while the investment in Panaxia will commence with the merger of the company into Herodium. Besides Rosen, the group investing in Herodium contains Canadian fund Murchinson; Dana Aviv, daughter of late contractor Moshe Aviv; and real estate tycoon Eli Michel Ruimy.
Herodium will raise NIS 4 million from Luzon Real Estate and Finance, whose investment will be on the same terms as that of the group headed by Rosen. Like Rosen's investment, Luzon's investment will begin on the date of the merger between Herodium and Panaxia. Luzon, formerly Netz Hotels, has a NIS 50 million market cap. Its shareholders' equity at the end of March was NIS 84 million. Luzon is controlled by the Luzon group.
Early this month, Luzon reported that its board of directors had decided to make investments in public cannabis companies amounting to up to 10% of its shareholders' equity.
Panaxia said that it would use the money from its placement to complete its preparations for exporting to Europe, and to continue the expansion and growth in its business activity. The investment by Rosen and his partners will be at NIS 4.69 per share, representing a 15% discount on Herodium's share price when the agreements were signed. Herodium's share price was down by over 5% to NIS 5.10 today.
Herodium's current market cap, before the merger with Panaxia, is NIS 72 million, giving the merged company a NIS 290 million value. If cannabis exports from Israel are approved and Panaxia actually exports cannabis, additional shares will be allocated to its original owners that will give the merged company a value of NIS 480 million. Panaxia said that Rosen was given a 15% discount on the company value on the signing date.
A 550% paper profit on Cannabit
Rosen and his partners are investing NIS 32 million investment in Cannabit, although the investment has not actually taken place yet. According to the current share price, Rosen and his partners have made a 550% paper profit, amounting to NIS 176 million, on their investment. The group will receive 13.2 million shares in Cannabit, which means that the number of shares in the company will almost double when the investment takes place.
The announcement of Rosen's investment in Panaxia comes one day after Cannabit and Panaxia announced a cooperation agreement between them in which Panaxia will buy six tons of raw material from Cannabit for NIS 30 million over three years for processing into oil for export to Europe.
Published by Globes, Israel business news - en.globes.co.il - on May 13, 2019
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