Little Green Pharma (ASX: LGP) has entered into a binding Scheme Implementation Deed with Cannatrek Ltd to acquire 100% of Cannatrek via a scheme of arrangement. The proposed Little Green Pharma Cannatrek merger combines two of Australia’s largest medicinal cannabis companies, creating a combined entity with pro-forma revenue of $112.3m and Adjusted EBITDA of $13.0m.
The transaction delivers an immediate 3x revenue scale increase for LGP shareholders, transforming the company from a $36.8m standalone revenue base into a cash-generative platform with $14.9m in combined cash reserves. Cannatrek shareholders will initially hold approximately 60.5% of the merged group, with LGP shareholders retaining 39.5%, subject to final contingent value (CV) share conversion.
| Metric (FY2025) | LGP Standalone | Cannatrek Standalone | Pro-Forma Combined |
|---|---|---|---|
| Revenue | $36.8m | $75.5m | $112.3m |
| Adjusted EBITDA | $2.9m | $10.1m | $13.0m |
| Operating Cash Flow | ($0.9m) | $7.6m | $6.6m |
| Cash Position | $2.4m | $12.5m | $14.9m |
The combined entity achieves an 11.6% Adjusted EBITDA margin, positioning the group to self-fund European expansion without shareholder dilution. Management has outlined synergy opportunities across Australian and European GMP manufacturing, clinic consolidation, and cost optimisation.
What is a scheme of arrangement?
A scheme of arrangement is a court-approved transaction mechanism allowing a company to restructure its shareholding. Under this proposal, Cannatrek shareholders will receive 1.835806 new LGP ordinary shares plus 0.727502 CV shares for every Cannatrek share held.
The Scheme requires approval from both Cannatrek shareholders and the Federal Court of Australia. An independent expert will assess whether the transaction is in the best interests of Cannatrek shareholders, with the Board intending to unanimously recommend the Scheme subject to no superior proposal emerging.
CV shares provide an adjustment mechanism based on uncertain liabilities affecting either party within six months after completion. Two years after implementation, these liabilities will be assessed to determine final share conversion. If all CV shares convert, Cannatrek’s ownership could increase to 68.2%, with LGP’s minimum falling to 31.8%.
The Cannatrek Board has confirmed it will recommend shareholders vote in favour, subject to the independent expert’s conclusion. LGP’s Board similarly supports the proposal for the purposes of ASX Listing Rule 7.1.
Strategic rationale driving the combination
Vertical integration from seed to patient
The merger creates a fully integrated medicinal cannabis operation controlling cultivation, GMP-certified manufacturing, distribution, and clinic operations across two continents. LGP’s 21,500m² Danish cultivation facility pairs with Cannatrek’s market-leading Australian product portfolio and latent GMP packaging capacity.
The combined group controls 33 products across 11 distribution territories, with digital platforms Greenship and MyEden strengthening connectivity across the patient journey. Cannatrek sources its portfolio from licensed domestic and international suppliers, including exclusive access to Australia’s highest-selling flower strain.
LGP Denmark has supplied white-label products since 2023 and targets own-brand supply arrangements for 2026, whilst Cannatrek operates GMP-certified storage and packaging facilities in Shepparton, Victoria. The group’s national distribution model services pharmacies and clinics via direct B2B channels, third-party distributors, and proprietary digital infrastructure.
Synergy opportunities across operations
Management has identified material synergy opportunities across manufacturing, cultivation, and operations:
- Manufacturing optimisation: Leveraging Cannatrek’s Australian GMP facilities to produce LGP products domestically whilst utilising LGP Denmark’s latent capacity for Cannatrek’s European supply
- Supply chain consolidation: Sourcing Cannatrek’s product range from LGP cultivation assets in Australia and Denmark
- Clinic integration: Combining MyEden’s B2C telehealth platform with LGP’s existing clinic operations
- Cost rationalisation: Optimising expenses across duplicated functions to improve margins
The cash-generative profile allows self-funded growth without requiring additional capital raising. Vertical integration captures margin at every supply chain step, creating a competitive moat that fragmented competitors cannot replicate without significant capital expenditure.
European and Australian market tailwinds
The Little Green Pharma Cannatrek merger is positioned to capitalise on accelerating market growth across key jurisdictions. Australia’s medicinal cannabis market is projected to surpass $1.0bn in sales by 2026, whilst Europe’s total market reached US$3.5bn in 2024 with a forecast 33.6% CAGR through 2032.
Germany’s Q3 2025 imports hit a record 56.9 tonnes, representing 19% quarter-on-quarter growth. The country has imported 142.3 tonnes across the first three reported quarters of 2025, with Denmark remaining a top-three exporter.
LGP’s presence in 10 export markets provides an immediate international distribution highway for Cannatrek’s high-performing product portfolio. Key developments include:
- LGP delivered a $0.6m oil shipment to France in November 2025
- Spain’s regulatory framework proceeds on schedule, with product registration processes similar to France
- UK private clinic market now serves an estimated 60,000-65,000 active patients
- France has extended its transition period beyond March 2026 to ensure continuity of patient care
The combined entity is positioned to capitalise on maturing markets where scale, brand recognition, and operational efficiency are key competitive drivers. Fragmented players face rising distribution and regulatory costs, including anticipated increases from imminent TGA reforms.
Transaction terms and indicative timeline
Under the Scheme Implementation Deed, Cannatrek shareholders will receive Consideration Shares and CV Shares in exchange for their holdings. The CV share mechanism adjusts final ownership based on uncertain liabilities assessed two years after implementation.
Final ownership ranges from approximately 60.5% to 68.2% for Cannatrek shareholders and 31.8% to 39.5% for LGP shareholders, depending on CV share conversion outcomes. All new LGP shares will be fully paid and rank equally with existing securities.
Voluntary escrow arrangements demonstrate management alignment, with approximately 23% of combined group shares subject to six-month escrow and an additional 23% subject to twelve-month escrow. Current Cannatrek major shareholders (>1.5%) will enter voluntary escrow deeds, whilst LGP major shareholders including Tiga Trading Pty Ltd and entities associated with Managing Director Paul Long will implement matching arrangements.
Key milestone dates include:
- First Court Hearing: 6 March 2026
- Scheme Booklet dispatch: 10 March 2026
- Shareholder votes: 10 April 2026
- Second Court Hearing: 21 April 2026
- Scheme effectiveness: 22 April 2026
- Implementation Date: 1 May 2026
What this means for investors
The proposed Little Green Pharma Cannatrek merger validates LGP’s consolidation strategy whilst creating material value through operational scale and vertical integration. The transaction transforms LGP from a break-even operation generating $2.9m Adjusted EBITDA into a high-margin leader with $13.0m Adjusted EBITDA and $14.9m cash to fund European growth.
Cannatrek contributes approximately 80% of pro-forma EBITDA, providing the financial strength to expand LGP Denmark’s 21,500m² facility and achieve production scale unattainable by smaller competitors. The combination pairs European cultivation capacity with Australia’s top-selling product portfolio, creating one of the largest medicinal cannabis production footprints globally.
Enhanced scale positions the combined entity for institutional investor interest, improved analyst coverage, and potential index inclusion. Larger profitable platforms typically attract higher market multiples than standalone businesses, creating potential for valuation re-rating as the group transitions to institutional grade.
Strategic Integration
By controlling the chain from Seed to Patient, the new entity captures margin at every step, creating a competitive moat that peers cannot bridge without large CapEx.
The merger establishes a platform for ongoing sector consolidation, with mature markets favouring players possessing deep balance sheets, integrated supply chains, and the ability to offer diversified product suites at competitive pricing. Success in this environment is tied to operational scale and consistent supply, advantages the combined group is positioned to deliver.
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