It’s been a remarkable journey. And it’s far from over. But it has taken a fascinating new twist.
Wayland Group Corp (CSE:WAYL) has followed a path of constant growth from an early-mover Canadian licenced cannabis producer to the global, vertically integrated operation we see today.
In fact, Wayland now has proximity to virtually every legal cannabis jurisdiction in a progressive-minded world that just keeps getting larger as medical cannabis legislative reforms replicate around the globe.
Wayland has operations in nine countries, set to double with the ICC merger
But it this too much of a good thing?
Probably so. Because the collective value of all of Wayland’s international assets has largely been discounted from the company’s compressed share price over the past couple of years.
Why is this? It’s simply because investors have not been able to wrap their heads around the true intrinsic value of all of these first-mover or early-mover forays into lucrative new foreign markets. Not yet anyway.
So Wayland has solved this dilemma with a blockbuster announcement last week that signals what appears to be reverse takeover of sorts to unlock value in its often overlooked foreign portfolio of assets.
Wayland and another cannabis company with impressive international exposure, International Cannabis Corp (ICC), announced a letter of intent to merge assets and operations into an international cannabis infrastructure of unparalleled reach and scale. ICC also trades on the Canadian Stock Exchange under the symbol WRLD.U.
As outlined in the LOI, the two companies will create a subsidiary owned 50.1% by Wayland and 49.9% by ICC, which will house all of Wayland’s international business assets.
The new subsidiary is valued at C$258 million, according to the price of shares issued by ICC to compensate Wayland for unlocking its international portfolio – 300 million shares at CDN $0.43 each. Wayland plans to spin out these shares to shareholders after the designated holding period expires.
This transaction maximizes shareholder value to the tune of about C$129 million in ICC shares. On top of that, following the subsidiary spinoff, the market can more accurately reflect the value of Canadian operations as they begin to produce the results that Wayland shareholders have been banking on for quite some time.
This will come as welcome news to long-term Wayland investors, who have watched their shares lag the benchmark Horizons marijuana ETF HMMJ for most of the past year.
The simple fact is -- Wayland has outgrown its Canada-only story. It’s still a great story, but there are now new compelling narratives to talk about from overseas, as well as Latin America.
When the Whole is Greater than the Sum of the Parts
ICC may not be as internationally diversified as Wayland. But it has made some impressive beachheads into new, untapped foreign markets. For instance, it already has advanced revenue-generating operations in Poland with CBD isolate extraction capacity of over 2,400,000 grams per year.
Also, ICC has an exclusive agreement with Cosmos Holdings, a European pharmaceutical distributor, to procure and distribute medical cannabis products and cannabis derivatives, representing approximately 35,000 pharmacies across 16 countries.
According to a recent ICC press release, “Wayland's 125,000 kg supply of CBD flowers for extraction will be processed in International Cannabis’ Polannabis operations and finished into distillate. Leveraging Wayland's patented Vesisorb formulations, Cosmos Holdings will then manufacture finished dose CBD products, including oral tablets in its EU-GMP certified facilities in Greece.”
In total, ICC and Wayland are involved in 18 countries. Combining their operations will serve these jurisdictions with greater economies of scale and allow for the seamless transfer of technology and management expertise. It’s a good marriage.
Two Reasons Why this Makes Sense for Wayland
Wayland’s Canadian production profile is ramping up nicely. The company is becoming one of Canada’s top producers of medical and recreational pharmaceutical-grade (EU-GMP certified) cannabis with one of the lowest production costs in Canada.
Once fully completed, Wayland’s automated, high-efficiency facilities are projected to produce well over 100,000 kgs of dried flower at a cost of around $0.60 per gram. That’s one of the largest projected annual outputs in the industry. And it will be very challenging for anyone to better a cost base of $0.60 a gram.
Currently, medical and recreational products (over 7,500 kg) are flowing into four Canadian provinces, and exports (9,000 kg over three years) are shipping to Germany. This is clearly a stand-alone operation of considerable scale and complexity.
Separating the Canadian assets from the international operations should help investors focus on Wayland’s domestic results in a way that compares more directly with its Canadian peers.
Also, the potential value of the international business can be more fully appreciated by investors once it is moved out from behind the Canadian storefront. In the rest of the world, the growth potential for Wayland is enormous when viewed in its entirety, especially with ICC added to the mix.
The spin-off is expected to give Wayland shareholders a stake in the new entity based on some fraction of the number of Wayland shares they hold. This would shield the Canadian business, which is funded for domestic build-out, from any potential dilution of share valuations if new capital raises are needed for further foreign expansion.
A Diversified EU Powerhouse in the Making
The business operations of Wayland’s German subsidiaries alone tell a corporate success story that is about to reach a near-term climax in the coming months as integrated operations (seed to sale) kick in.
In addition to retro-fitting one of the largest, most technologically advanced cultivation and processing plants in the EU (while expecting EU-GMP certification within the next few weeks), Wayland has just taken in a bumper crop of hemp from its first harvest in Germany.
These hemp-flower CBD extractions are targeted for use in products ranging from beverages and edibles to gel capsules and transdermal products. A secondary boost for the hemp crop margins can be realized from the use of the non-flower bulk of Wayland’s hemp harvest in industrial markets.
Most notably, Wayland is already producing and shipping a range of CBD products in Germany, Austria and Switzerland, and has begun a joint venture in Italy with CBD Italian Factory, a subsidiary of major agri-business Group San Martino.
Also, Wayland recently entered the UK market through a controlling interest in Theros Pharma, an early stage company serving patients with prescriptions for medical cannabis.
In the tiny state of Malta, Wayland has developed a huge advantage for reaching the entire EU market. Malta is among the most comprehensively cannabis-friendly commercial regimes anywhere in the world. It will serve as a processing hub and conduit for Wayland products to move throughout the EU with tax-exempt status.
All in all, Wayland has the first-mover advantage at key points throughout the EU, and is positioned to become one of the dominant suppliers in this ever-expanding market.
Combining this potential with ICC’s advanced network of GMP-certified production and distribution channels will give Wayland an immediate leap forward in EU market penetration. It will also absorb another 30,000 kgs of Wayland’s GMP-certified production over an initial term of three years.
Poised for Growth in South America and the South Pacific
Most new and emerging cannabis markets start as medical-use only for THC content, but also allow for a wide range of non-psychoactive medical, therapeutic, and consumer products based on CBD content.
In addition to medicinal production, Wayland and its subsidiaries already have the experience of producing multiple lines of cannaceuticals based on CBD derivatives, with over-the-counter consumer products for a range of health, wellness, and lifestyle applications.
As ventures in Colombia, Argentina, and Australia move forward, Wayland and ICC can replicate the success of the Canadian and European production template. This should speed the process of bringing finished products to market as these early-stage cannabis economies take shape and expand.
Why ICC’s VESIsorb Nano-technology is a World-Class Asset
Wayland has exclusive rights worldwide (excluding the USA) to multi-patented VESIsorb® nano-technology for cannabis applications – ones that are being transferred to ICC. Vesisorb is a revolutionary pharmaceutical system for optimizing ingestible forms (capsules, edibles, beverages) of oil-based products, including cannabis oils.
This technology for conversion of oils to water-soluble compounds is clinically proven to provide superior dosage control and over 600% better bodily absorption rates. Vesisorb has a long history of mass production in other pharmaceutical and nutraceutical applications. As a result, it is a true game-changer for improving the cannabis consumer experience.
On top of that, Vesisorb’s more efficient delivery of active ingredients means the amount of raw ingredient (THC or CBD extract) required is drastically reduced. This all involves some very complex science, but the net result is pretty simple: more manufactured output value is created for every unit of ingredient put in.
The combination of Wayland’s and ICC’s worldwide cannabis production and distribution potential with Vesisorb’s established nano-technology system should lead to exponential growth across a wide range of high-margin medicinal and consumer product categories.
Seen above, Wayland’s Mariplant water-soluable CBD capsules
Capitalizing on Proven Success to Generate New Shareholder Value
By following a consistent early-mover strategy, and combining now with ICC’s widespread international footprint, Wayland has created a world of opportunity beginning in Canada but extending out to a global scope that few cannabis companies can match.
The clear takeaway here is that Wayland has demonstrated success in building a world-leading production model in Canada, and is now replicating that model in Europe. In fact, the foundations are already in-place for further iterations of the model in multiple locations around the world.
This spin-off of Wayland’s global opportunities through the ICC merger promises to unlock considerable intrinsic value in the company’s undervalued share price, while also adding new strategic global efficiencies and opportunities. Investors in the original Canadian business will be first in line to reap those benefits.
Investors in Wayland should now be able benefit from a streamlined business model that focuses on core competencies as Wayland emerges as one of North America’s largest and most cost-efficient cannabis growers.
At the same time, ICC promises to fast capitalize on what now amounts to a powerful portfolio of first-mover or early-mover advantages in untapped medical cannabis markets all across the globe, and especially in Europe. Accordingly, both stocks should enjoy a banner year in 2019.
Senior Staff Writer: Daniel Brooks