Australian cannabis company prepares for North American expansion

Australian medicinal cannabis company The Hydroponics Company (THC) is preparing for expansion in Canada ahead of the country’s legalization of recreational marijuana use later this year.

The Chairman of THC Steven Xu and acting CEO Ken Charteris have recently returned to Australia from Canada, where they were reviewing operations of company subsidiaries Crystal Mountain Products and Dragon Vision. Both are Canadian-based companies involved in the manufacture and distribution of the hydroponic equipment used to grow cannabis.

The Canadian Senate passed the Canadian Cannabis Act and it received Royal Assent in June. It will become law on 17 October.

The objective of Xu and Charteris’ visit to Canada was to identify the resources and support measures that Crystal Mountain will require when demand for its products begins to scale up after the law becomes active. The company is also looking to deal with demand from the US, as state and federal laws there should follow Canada’s lead.

The cannabis sector is experiencing a surge in M&A activity, and in May, therapeutic producer Aurora took over rival MedReleaf, creating an industry giant. THC is currently carrying out due diligence on a proposed takeover of Canadian Hydroponics, also discussed while Xu and Charteris were in Canada.

In addition, the two THC representatives negotiated on a collaboration with Ascent Industries, a cannabis production company. A relationship with Ascent would give THC access to additional cannabis strains along with more information on medical-grade cannabis and the North American cannabis market. Xu said: ‘There are obvious synergies for THC. THC is positioning itself to be able to capitalize on its existing Canadian business and expand its operations throughout North America. We look forward to developing relationships and expanding our hydroponics operations into the USA.’

He added that the pending changes in Canada and possible changes in the US are a sign of things to come in Australia. Xu said: ‘We see the implementation of the bill in Canada and the possible acceptance of state legislation in the USA to provide a blueprint for the future adoption of legal cannabis in Australia. The more we understand the changing landscape, the better prepared THC will be for these changes.’

North America is not the only expansion target market, as THC is currently completing an exclusive supply deal in Europe for hydroponics products designed and developed by Crystal Mountain.

Companies are including Australia in their ventures into the recreational and medical cannabis market. Last month, Melbourne Airport agreed to build and fund what will be Australia’s largest medical cannabis manufacturing facility and lease it to ASX-listed company Cann Group.

Earlier this year, THC announced the impending departure of Crystal Mountain CEO Jason Colquhoun. The company has now said that Colquhoun will be continuing as CEO until 31 December 2019.

Xu said: ‘The board is delighted to have secured Jason’s continuing services. It is important that we have a strong, experienced presence in North America. We are growing our warehouse capacity, increasing our product lines and seeking complementary businesses to acquire or joint venture with North America. THC’s future in North America is promising.’