Halo Collective Expands Into Functional Drinks Via H2C Beverages Acquisition & $30M Deal With Elegance Brands

Halo Collective Inc. HALO HCANF announced Wednesday that it is strategically expanding into the functional beverage market with a proposed stock-based acquisition of a private company operating as H2C Beverages and is entering into a distribution and manufacturing agreement with Elegance Brands Inc.

H2C Beverages Acquisition

The Toronto-based Halo inked a definitive agreement to acquire 1285826 B.C. Ltd, which is doing business as H2C Beverages, a brand specializing in non-psychoactive cannabinoids and functional mushroom beverages.

In return, Halo agreed to issue 7.54 million of its common shares.

The transaction is expected to close in January or once it obtains regulatory approvals.

The deal provides Halo with a toehold in one of the fastest-growing sectors of the cannabidiol market. It adds H2C's line of premium flavored waters that are nano emulsified to maximize absorption and other plant-based beverages infused with cannabinoids, functional mushroom extracts with fulvic and humic minerals from the Rocky Mountains to the company's growing product portfolio.

"Our strategic acquisition of H2C Beverages will bolster Halo's growth opportunities, even as the recreational cannabis industry faces over-supply issues in our California and Oregon markets," Kiran Sidhu, Halo's CEO commented.

Elegance Brands Distribution & Manufacturing Deal

Under the terms of the distribution agreement, Elegance has agreed to purchase $30 million of Halo's H2C and Hushrooms branded products during the two years following the launch of the products and their distribution to retail outlets across the country.

Under the expanded collaboration with Elegance, Halo will propel the national distribution of beverages, capsules and topical supplements under H2C and Halo's functional mushroom brand, Hushrooms. The products will be marketed under three subcategories, including active, relax and focus.  

Elegance will purchase the products at a price of up to 130% of manufactured costs incurred by Halo.

In addition, Elegance will provide certain consulting services to Halo, including those regarding the development of branding, marketing and manufacturing best practices, product development as well as sales strategies through to launch.

Halo has agreed to issue $2.5 million of common shares to Elegance in consideration of the consulting services to be provided by Elegance in connection with the branding, development, manufacturing and distribution of the H2C and Hushrooms product lines.

"We believe that Halo's innovative line of products will be strong sellers alongside our portfolio of brands all built around innovation, and we are excited to offer them to our expanding distribution customers," Raj Beri, Elegance's CEO and founder said.

The transaction is expected to deliver up to $9 million in profit during the 24-month launch period.

More recent news from Halo:

• Cannabis Movers & Shakers: MindMed, Halo Collective, Item 9, PSYC, Flora Growth
• Halo Collective Borrows CA$14M To Fund Expansion Into Nutraceutical Products And Retail
• Halo Collective's Q3 Revenue: 28% YoY Growth To $8.7M, Completes Simply Sweet Gummy Acquisition

HCANF Price Action

Halo's shares traded $8.25% higher at $1.01 per share at the time of writing on Wednesday.

Photo: Courtesy of Charles Forerunner on Unsplash