Village Farms International (VFF), a grower of agricultural produce and cannabis, announced Monday that it has acquired 100% of Colorado-based CBD-platform Balanced Health Botanicals for $75 million.
Balanced Health owns and operates one of the largest brands in the hemp-derived cannabidiol (CBD) market in the United States, providing Village Farms an additional pathway to the high-THC U.S. cannabis market.
The acquisition is expected to contribute annualized sales of over $30 million at an annualized adjusted EBITDA margin of over 15% in 2022. (See Village Farms International stock charts on TipRanks)
Balanced Health has been able to maintain a top-five market share in the CBD market, while generating positive cash flow.
Village Farms CEO Michael DeGiglio said, “Since U.S. federal legalization in late 2018, hemp-derived CBD products, as well as other cannabidiol-based products, have been part of our comprehensive strategy focused on high-value, high-growth plant-based consumer packaged goods opportunities in cannabis.
“As a well-established, profitable leader in the U.S. retail CBD market, Balanced Health is the right opportunity, at the right time, to take our next major step forward in anticipation of regulatory clarity that will propel the growth of this nascent market.”
On August 9, Cantor Fitzgerald analyst Pablo Zuanic maintained a Hold rating on VFF while lowering its price target to C$11.50 (from C$11.70). This implies 1.8% downside potential.
Zuanic stated, “Although we stay Neutral, we realize the stock discount to larger peers (that are losing share) could narrow over time as the branded cannabis unit gains scale, and strategic actions are taken that can allow investors to better value the non-cannabis assets.”
Overall, VFF scores a Moderate Buy consensus rating among analysts based on one Buy and one Hold. The average Village Farms International price target of C$17.03 implies 49.8% upside potential to current levels.