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RotoGro (ASX:RGI) is expanding its modus operandi with the acquisition of 51 per cent of Canadian medicinal cannabis cultivator Medicinal Compassion CanniFarms.
The acquisition, worth around $7.5 million, is part of RotoGro's plans to streamline its business model, but vertically integrating a cultivator directly into the RotoGro business structure.
Prior to the acquisition RotoGro was primarily focused on technology that makes the cultivation of cannabis possible; hydroponics.
RotoGro CEO Adam Clode says the prospect of acquiring a cultivator will give the company a massive boost in the industry.
"The proposed acquisition is in line with the company's strategy of moving away from capital intensive projects and striving for sustained revenue from establishing cultivation partnerships," says Clode.
"We look forward to CanniFarms near term issue of a Health Canada approved cultivation licence and moving the company into sustained operational revenue capitalising on our patented proprietary technology providing the lowest cost of production for indoor cannabis cultivation."
CanniFarms is a privately held corporation based in Ontario, Canada, with a cultivation facility located in Guelph, Ontario.
The business is focussed on the lawful production of cannabis in its 55,000 square foot facility that will use RotoGro's patented hydroponic technology.
CanniFarms, in collaboration with RotoGro, intends to continue building its facilities during Q4 2020, to be comprised of approximately 30,000 square feet.
The Canadian company is currently an applicant for Health Canada Cultivation and Processing licences and is in the late stages of that process.
Canada legalised marijuana for recreational use in October 2018.
Shares in RotoGro are up 9.68 per cent to $0.17 per share at 3.42pm AEDT.
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