Charlotte’s Web Acquired Abacus Health Products for Combined 35% Market share of CBD in Food/Drug/Mass Retail Channel

Charlotte’s Web Holdings, Inc. (TSX: CWEB, OTCQX: CWBHF), is the world’s most trusted hemp extract and market leader in hemp-derived cannabidiol wellness products, and Abacus Health Products, Inc. (CSE:ABCS, OTCQB:ABAHF), is a leader in over-the-counter topical products combining active pharmaceutical ingredients with hemp extract. Companies announced that they have entered into a definitive arrangement agreement pursuant to which Charlotte’s Web proposes to acquire all of the issued and outstanding subordinate voting shares of Abacus, after conversion of all outstanding proportionate voting shares of Abacus into Abacus Shares.

Abacus is engaged in the development and commercialization of over-the-counter (OTC) topical medications with active pharmaceutical ingredients and which contain organic and natural ingredients, including a cannabinoid-rich hemp extract containing CBD from the Cannabis sativa L plant. Abacus’ products are aimed at the rapidly growing markets for topical pain relief and therapeutic skincare and are based on proprietary patent-pending technologies developed by Abacus. Abacus’ formulations combine advanced science with organic and natural ingredients to provide safe relief. Abacus currently offers three lines of products: CBD CLINIC™, marketed to the professional practitioner market, and CBDMEDIC™ and Harmony Hemp™, marketed to the consumer market. Abacus’ products are offered across the United States and are produced by a contract manufacturer in an FDA registered and audited manufacturing facility.

Charlotte’s Web Holdings, Inc. is the market leader in the production and distribution of innovative hemp-derived cannabidiol (“CBD”) wellness products. Founded by the Stanley Brothers, the Company’s premium quality products start with proprietary hemp genetics that are responsibly manufactured into hemp-derived CBD extracts naturally containing a full spectrum of phytocannabinoids, including CBD, terpenes, flavonoids and other beneficial hemp compounds. Charlotte’s Web product categories include CBD oil tinctures (liquid products), CBD capsules, CBD topicals, as well as CBD pet products. Charlotte’s Web hemp-derived CBD extracts are sold through select distributors, brick and mortar retailers, and online through the Company’s ADA compliant website.

Under the terms of the Arrangement Agreement, shareholders of Abacus will receive 0.85 of a common share of Charlotte’s Web for each Abacus Share held. The Exchange Ratio implies a price per Abacus Share of C$4.39, representing a premium of 38% based on the 10-day volume weighted average price of the Abacus Shares on the Canadian Securities Exchange  and the 10-day VWAP of the Charlotte’s Web Shares on the Toronto Stock Exchange as of March 20, 2020, for implied total equity consideration of approximately C$99 million.

This acquisition combines Charlotte’s Web, the market leader in hemp-derived CBD wellness products, with Abacus, the market leader in OTC topical products combining active pharmaceutical ingredients with hemp extract, to create the world’s largest vertically integrated hemp-derived CBD company. For Charlotte’s Web the combination benefits from the current U.S. regulatory environment which favors topical- CBD products within the food/drug/mass channel. For Abacus, the acquisition provides the advantages of joining an established and industry leading platform and benefiting from leading CPG management and brand equity with a low-cost vertical supply chain producing “the world’s most trusted hemp extract™”. The combined entity is anticipated to represent approximately 34.7%3 of U.S. CBD sales within the F/D/M channel. Combined sales for the third quarter of 2019 were $29.1 million.

Since its inception in 2014, Abacus has focused on becoming the leading practitioner and consumer choice for OTC topical medications with active pharmaceutical and natural ingredients, including a cannabinoid-rich hemp extract containing CBD. Abacus currently distributes over 50 SKUs through approximately 12,000 unique doors and 16,500 health-care practitioners. Combined with Charlotte’s Web, the Transaction will reinforce Charlotte’s Web’s leading position in the CBD market, and substantially expand its existing topical offerings and presence in the key F/D/M channel.

“The complementary strengths of our relative market positions made this merger a logical strategic move,” said Deanie Elsner, Chief Executive Officer of Charlotte’s Web. “With this acquisition we strengthen the business to reflect the evolution of the category. Because most of Abacus’s products are positioned in adjacent categories, our combined distribution reach has limited shelf overlap. Together we are the most developed CBD company across every channel and segment and positioned to accelerate our growth and extend our market share. Furthermore, it enables us to drive more scale production through our vertically integrated infrastructure.”