Cannabis-focused healthcare company Bod Australia (ASX: BDA) has struck an exclusive agreement with investment fund NewH2 owned by Hong Kong-listed Health & Happiness Group (H&H).
Under the deal, NewH2 will make $5.5 million strategic investment in Bod – effectively giving NewH2 a 17.64% stake and the ability to appoint two directors to Bod’s board.
The deal means that H&H Group will have the exclusive right to commercialise Bod’s nutraceuticals, skincare, tinctures, hemp seed oil and lifestyle products. Also, the H&H Group will sell, promote, market and distribute these products under a new brand with first sales expected the first half of the 2020 financial year.
Bod said it stands to benefit from H&H Group’s global network and established product suite and will drive a more rapid scale-up alongside H&H’s internationally marketed products.
Bod is also set to receive a royalty on net sales as part of the transaction, as well as a cost-plus margin for the supply of its finished formulas and extracts.
In addition to the existing terms, Bod and H&H Group have also entered into a joint development agreement for future product development initiatives as part of the transaction.
Bod will retain full rights commercialise its medicinal CBD extracts for pharmaceutical purposes. The company will continue to expand this arm of the business both in Australia and abroad.
As part of the $5.5 million investment, NewH2 will subscribe for 14,864,865 new shares in Bod at $0.37 per share.
Bod will also receive an upfront cash payment of $1.5 million to be used to transition into H&H Group’s R&D and innovator of cannabidiol and hemp products.
According to Bod, the capital received from the placement will be utilised directly on core R&D activities, as well as for costs associated with R&D expenditure, including personnel costs and general working capital requirements.
Core R&D activities will include commercialisation of Bod’s sublingual wafer delivery technology, development of new nutraceutical and skincare product ranges, creating new delivery methods, formulating bespoke combinations, supporting nutritional claims, as well market analysis and process optimisation.
“We are excited for NewH2 to take this step with Bod and to be investing in this high-growth industry, particularly in Australia where there is a clear commitment and ambition to be world-leading in industry development and exporting,” said Laetitia Garnier, executive director and chief executive officer of H&H Group.
“We have taken our time to advance a position in this niche industry, but we have always believed in its huge potential,” she added.
Bod’s agreement with H&H provides it with “financial flexibility” and “considerable validation of our work to date”, according to Bod chief executive officer Jo Patterson.
“H&H Group is undoubtedly the global leader in supplements and vitamins. The group boasts a broad distribution network and suite of established brands. We are thrilled that they have chosen our products and formulas to broaden its product suite.”
“This development is game-changing for Bod and we are delighted to welcome H&H Group as a strategic investor and new commercial partner,” she added.
News of the deal helped Bod’s shares gain almost 38% in early morning trade, up to $0.48.