AusCann Group Holdings Ltd (ASX:AC8) entered into a scheme implementation deed to acquire CannPal Animal Therapeutics Limited (ASX:CP1) from Merchant Opportunities Fund, managed by Merchant Funds Management Pty Ltd and others for AUD 16.9 million on November 14, 2020. The terms of the scheme provide that CannPal shareholders will be offered 1.3 new fully paid ordinary shares in AusCann for every fully paid ordinary share in CannPal. Post completion, CannPal will become a wholly owned subsidiary of AusCann. The Combined Group will operate under the name of AusCann Group. CannPal agrees to pay to AusCann AUD 0.15 million in case of termination and AusCann agrees to pay to CannPal AUD 0.15 million as break fee. Founder and Managing Director of CannPal, Layton Mills, will lead the combined company. Nick Woolf has decided to tender his resignation as Chief Executive Officer, but has agreed to stay with AusCann as Interim Chief Executive Officer until completion of the Transaction, and thereafter in an advisory capacity to assist with an orderly transition of the Chief Executive Officer role until June 30, 2021 (unless agreed earlier).

The Transaction is subject to customary conditions, including CannPal shareholder approval and the Supreme Court of Western Australia approval. The Scheme is not subject to finance and is subject only to conditions and provisions customary for transactions of this type, including exclusivity arrangements (with relevant fiduciary carve outs) and provisions for payment of reciprocal break fees of AUD 150,000 in certain circumstances, Regulatory Approvals, no material adverse change, FIRB approval (if required), no change, event, circumstance or occurrence occurs which results in or has the effect of (or which with the lapse of time is reasonably likely to result in or have the effect of) reducing, or being reasonably likely to reduce, the AusCann Group's consolidated available cash to: (i) less than AUD 12.5 million as at January 31, 2021; or (ii) (if the Explanatory Booklet is dispatched to CannPal Shareholders after January 31, 2020) less than AUD 11.6 million as at February 28, 2021, (Third party consents) all consents, approvals or waivers of rights by parties other than CannPal under any Material Contracts are necessary or desirable are obtained in a form and subject to conditions acceptable to AusCann.

CannPal's largest and founding shareholder, Merchant Opportunities Fund, which holds 19.88% of CannPal, has indicated its intention to vote in favour of the Scheme. The Board of CannPal unanimously recommends that CannPal shareholders vote in favour of the Scheme at the scheme meeting. Each Director of CannPal intends to vote in favour of the Scheme in respect of all the CannPal shares controlled or held by or on behalf of that Director, subject to those same qualifications. The Scheme Meeting will be held on March 8, 2021. As of March 8, 2021, transaction has been approved by shareholders of CannPal Animal Therapeutics Limited. The Scheme remains subject to the approval of the Supreme Court of Western Australia, which will be sought at the second court hearing scheduled for March 10, 2021.

The Scheme is expected to be implemented either by March 31, 2021 or April 30, 2021 depending on dispatch of Explanatory Booklet. The scheme will be effective on March 11, 2021. Steinepreis Paganin acted as legal advisor for CannPal, KPMG Financial Advisory Services (Australia) Pty Limited will provide the Independent Expert's Report for CannPal shareholders. As on January 3, 2021, KPMG Financial Advisory Services (Australia) Pty Limited concluded that the scheme is fair and reasonable and in the best interest of CannPal shareholders, in the absence of a superior proposal. Kidder Williams Ltd acted as financial advisor and MinterEllison acted as legal advisor for AusCann.

AusCann Group Holdings Ltd (ASX:AC8) completed the acquisition of CannPal Animal Therapeutics Limited (ASX:CP1) from Merchant Opportunities Fund, managed by Merchant Funds Management Pty Ltd and others on March 11, 2021. The Scheme became effective earlier today when a copy of the court order was lodged with the Australian Securities and Investments Commission. CannPal Shares cease trading on ASX at close of trading on March 11, 2021.