Canadian based LGC capital has pulled out of the infamous majority shareholder deal with South African company House of Hemp. Leaving many to wonder what went wrong.
The deal with LGC and HoH trended hard over 2017 and was best known for appearing to be a move by South African officials to pull the rug right out from under the feet of local cannabis activists and canna-preneurs by selling licenses to foreign companies, as covered in our extensive range of articles.
LGC has indicated though that they may have been sold an empty promise by HoH
“The South African Government has not put in place the legislative framework for the legalization of medical cannabis in that country. Although House of Hemp is still actively seeking a full set of commercial licenses, its lack of licenses at present means that it does not meet LGC’s strict criteria for near-term production and cash-flow.
As a result, House of Hemp no longer fits with LGC’s investment objectives. LGC has a number of other investment opportunities that it believes will offer better short-term returns for its shareholders. The amounts invested by LGC in its due diligence review of House of Hemp were not material.”
John McMullen, LGC’s CEO, commented; “LGC has a number of very exciting projects that are now moving rapidly towards commercial medical cannabis production. These businesses are LGC’s prime focus.”
Mr. McMullen continued, “With respect to terminating the House of Hemp transaction, the absence of medical cannabis legislation in South Africa unfortunately means that House of Hemp’s business is no longer one that suits LGC’s business objectives of investing in near-term cash-flowing businesses. Not every investment LGC investigates will be concluded, and if businesses do not 100% stack-up for any reason whatsoever with respect to due diligence, budgets, timing or production potential, LGC will walk away from these opportunities to focus on better suited investment opportunities around the globe that meet our strict investment criteria.”
Those of you who have been paying very close attention over the last year would do well to ask what does this all mean for The Cannabis Development Council of South Africa due to their close affiliation with HoH. Will they still be able to make good on their promises of licenses?
Prominent local activist and CDSA member Bobby Greenhash cleared the air a bit by stating, “So, here is one for all the lip flapping haters that insinuated we were lying….this is called “taking back the yard!”
We don’t need foreign influence, we are building our OWN African Model, and we will continue to help government solve the legislation issue, by formalizing the Cannabis culture and the Cannabis industry into an organised well oiled machine, that will eliminate poverty in our society. The CDCSA, and its regional affiliates are already in the process of helping government develop cluster business models, with focus on the traditional growers at this point.”
Some confusion is likely to still linger over HoH’s relevance and role in how legalization plays out in South Africa. What’s is certain though is that HoH will continue to struggle to find local support given the company’s long standing attitude of distancing itself from any legalization efforts and its inability to deliver the goods.