Acquisition will add extensive on-shelf product portfolio available in multiple regions

Expands PharmaCielo's global sales reach and market presence in Canada , Switzerland , Europe , Australia , New Zealand , Israel , and Brazil

TORONTO, June 6, 2019 /CNW/ - PharmaCielo Ltd. ("PharmaCielo" or the "Company") (TSXV:PCLO), the Canadian parent of Colombia's premier cultivator and producer of medicinal-grade cannabis oil, PharmaCielo Colombia Holdings S.A.S., today announced that it has entered into a scheme implementation agreement (the "Implementation Agreement") pursuant to which PharmaCielo has agreed to acquire all of the issued and outstanding shares and listed options of Creso Pharma Ltd. ("Creso Pharma") (ASX:CPH), for an aggregate purchase price of approximately A$122 million (the "Acquisition"). Creso Pharma is a global medicinal cannabis company that specializes in research, development and production of therapeutic, nutraceutical and animal health products. PharmaCielo will pay A$0.63 per Creso Pharma share, representing a premium of 50% over the closing trading price of the Creso Pharma shares on May 31, 2019. The purchase price for the Creso Pharma shares will be satisfied by the issuance of PharmaCielo common shares ("PharmaCielo Shares") priced at C$7.6166 per PharmaCielo Share being the 3-day volume weighted average trading price for the PharmaCielo Shares representing an exchange ratio of a 0.0775 PharmaCielo Shares per each Creso Pharma share.

The Implementation Agreement and related transactions have been unanimously approved by the board of directors of each of PharmaCielo and Creso Pharma. The board of directors of PharmaCielo received an opinion from its financial advisor that the consideration being offered by PharmaCielo under the Acquisition is fair, from a financial point of view, to PharmaCielo.

Deal Highlights

Upon closing of the Acquisition, the combined company is expected to benefit from the complementary assets and synergies between PharmaCielo and Creso Pharma including:

Creso Pharma's world-class Swiss-led team, with over 150 years of collective experience in the Pharma, Food and Cannabis industries.

Creso Pharma has commercialized four proprietary branded products in less than two years, including both human and animal health focused CBD-based nutraceuticals and complementary feed products.

A pipeline of four additional products to be commercialized in 2019 by Creso Pharma, adding both additional proprietary formulations and delivery technologies to the "Swiss Made" GMP compliant, pharma grade pipeline.

Creso Pharma active sales in thirteen countries including Australia , New Zealand , Brazil , Switzerland , Germany , France , the Netherlands and the United Kingdom complements PharmaCielo's networks in South America , Mexico , and Italy .

, , , , , , and the complements PharmaCielo's networks in , , and . Expand substantial range of proprietary strains currently registered for commercial cultivation through combination of industry leading Israeli R&D cultivation facility with Colombia R&D cultivation facility.

Establishment of dual-market licensed cultivation and processing facilities ( Canada and Colombia ) designed and constructed to comply with EU GMP standards will expand capacity for import and export of CBD material and products and medicinal grade cannabis production and products to multiple global markets.

and ) designed and constructed to comply with EU GMP standards will expand capacity for import and export of CBD material and products and medicinal grade cannabis production and products to multiple global markets. Continued participation by Creso Pharma shareholders in a global medicinal cannabis company with greater capitalization enabling aggressive market and sales development.

Creso Pharma supply offtake agreement in place with Canadian distribution network establishes ongoing product revenue stream.

Management Commentary

"PharmaCielo's acquisition of Creso Pharma, harnessing the synergies between us, creates a combined company that is poised to become a global powerhouse in the medicinal cannabis industry. Upon closing of the transaction, the combined company will quadruple our global footprint with presence in more than a dozen countries spanning North and Latin America, Switzerland, Europe, the Middle East, Australia and New Zealand," said David Attard, CEO of PharmaCielo. "The Acquisition affords us the opportunity to bring our high-quality Colombian oil production to market immediately and expand into higher-margin, branded product sales faster by harnessing the expertise of a proven and highly engaged commercialization team possessing both an immediately available product portfolio and active international sales channels."

"The quality and scale of PharmaCielo's cultivation and oil extraction operations in Colombia complements our focus on meeting global demand for the highest quality CBD and THC based therapeutic, nutraceutical and animal health products through increased access to the necessary quality and volume of oil production," said Dr. Miri Halperin Wernli, Co-Founder and CEO of Creso Pharma. "This arrangement with PharmaCielo is an incredible opportunity for Creso Pharma shareholders to benefit from being part of a best in class and well-capitalized global medicinal cannabis company."

For more details on the Creso Pharma transaction, please visit Pharmacielo.com/investors.

Acquisition Terms

Pursuant to the Implementation Agreement, PharmaCielo and Creso Pharma have agreed to implement a share scheme (the "Share Scheme") and an option scheme (the "Option Scheme") whereby:

Creso Pharma shareholders will receive 0.0775 of a PharmaCielo Share for each Creso Pharma share held, representing a price of A$0.63 per Creso Pharma share.

per Creso Pharma share. Each holder of listed Creso Pharma options will receive 0.0185 PharmaCielo Shares for each listed Creso Pharma option held, reflecting a price of A$0.15 per Creso Pharma listed option.

per Creso Pharma listed option. Holders of vested unlisted Creso Pharma options with an exercise price equal to A$0.80 will receive 0.0185 PharmaCielo Shares for each unlisted Creso Pharma option held, reflecting a price of A$0.15 per Creso Pharma unlisted option.

will receive 0.0185 PharmaCielo Shares for each unlisted Creso Pharma option held, reflecting a price of per Creso Pharma unlisted option. Holders of vested unlisted Creso Pharma options with an exercise price below A$0.63 will receive an amount of PharmaCielo Shares with a value equal to the difference between A$0.63 and the exercise price of their respective unlisted Creso Pharma options multiplied by the number of their respective unlisted Creso Pharma Options.

will receive an amount of PharmaCielo Shares with a value equal to the difference between and the exercise price of their respective unlisted Creso Pharma options multiplied by the number of their respective unlisted Creso Pharma Options. The Share Scheme will require approval by at least 75% of the number of votes casts and 50% of the number of voting shareholders at the meeting of Creso Pharma shareholders. The Option Scheme will require approval by at least 75% of the number of votes cast at the meeting of Creso Pharma option holders. The meeting of Creso Pharma shareholders and meeting of Creso Pharma option holders will both be held later this year.

The Share Scheme and Option Scheme are further subject to Australian Court approval and the approval of Australian Securities and Investments Commission.

The Acquisition and the issuance of PharmaCielo Shares are subject to the approval of the TSX Venture Exchange. Approval of PharmaCielo shareholders is not required.

In connection with, and subject to entering into the Implementation Agreement, PharmaCielo has agreed to advance Creso Pharma a CAD$3,500,000 secured bridge loan (the "Secured Bridge Loan") that may be increased by an additional CAD$1,500,000 at PharmaCielo's sole discretion, all pursuant to an amendment to Creso Pharma's existing loan trust deed, originally entered into with an arm's length party to Creso Pharma on April 26, 2019 . The Secured Bridge Loan will be secured by a general security agreement over the assets of Creso Pharma and a pledge by Creso Pharma to PharmaCielo, of the shares of Mernova Medicinal Inc., a subsidiary of Creso Pharma. The Secured Bridge Loan will bear interest at a rate of 15% per annum and will mature on November 30, 2019 . In the event that the Share Scheme is not approved by shareholders of Creso Pharma, the Secured Bridge Loan will mature on the date that is four (4) months after the date of the meeting of the Creso Pharma Shareholders. The proceeds of the Secured Bridge Loan are expected to be used by Creso Pharma for its general working capital requirements. The Secured Bridge Loan is subject to the approval of the TSX Venture Exchange and the completion of a definitive loan amendment and security agreements.

secured bridge loan (the "Secured Bridge Loan") that may be increased by an additional at PharmaCielo's sole discretion, all pursuant to an amendment to Creso Pharma's existing loan trust deed, originally entered into with an arm's length party to Creso Pharma on . The Secured Bridge Loan will be secured by a general security agreement over the assets of Creso Pharma and a pledge by Creso Pharma to PharmaCielo, of the shares of Mernova Medicinal Inc., a subsidiary of Creso Pharma. The Secured Bridge Loan will bear interest at a rate of 15% per annum and will mature on . In the event that the Share Scheme is not approved by shareholders of Creso Pharma, the Secured Bridge Loan will mature on the date that is four (4) months after the date of the meeting of the Creso Pharma Shareholders. The proceeds of the Secured Bridge Loan are expected to be used by Creso Pharma for its general working capital requirements. The Secured Bridge Loan is subject to the approval of the TSX Venture Exchange and the completion of a definitive loan amendment and security agreements. After closing, former holders of Creso Pharma securities will own approximately 14,590,690 PharmaCielo Shares, approximately 13% of the total PharmaCielo Shares outstanding.

The Implementation Agreement contains customary deal protections including a non-solicitation provision of alternative transactions by Creso Pharma and provides for, among other things, the Creso Pharma board of directors being able to consider a superior proposal in certain circumstances and a right for PharmaCielo to match any such superior proposal. The Implementation Agreement also provides for the payment by Creso Pharma of a termination fee of A$1,200,000 to PharmaCielo in certain circumstances. If the Share Scheme is not approved by Creso Pharma shareholders, Creso Pharma must reimburse PharmaCielo A$450,000. In addition, the Implementation Agreement provides that where the Acquisition is not completed because of a failure to perform by PharmaCielo, PharmaCielo would be required to pay a reverse break fee to Creso Pharma in the amount of A$1,200,000.

It is currently expected that, subject to receipt of all regulatory, court, shareholder and other approvals, and the satisfaction or waiver of all conditions, the Acquisition will be completed by the end of September 2019.

Further information regarding the Acquisition will be included in the explanatory booklet to be prepared by Creso Pharma and dispatched to Creso Pharma shareholders and listed option holders in advance the meetings to be called to approve the Share Scheme and Option Scheme.

A copy of the Implementation Agreement will be filed by PharmaCielo under its profile on SEDAR at www.sedar.com at the time when PharmaCielo files a material change report in respect of the Acquisition.

For more information on Creso Pharma, including its most recent financial statements, please visit the company's website at: https://www.cresopharma.com/for-investors.

Financial and Legal Advisors

Cormark Securities Inc. ("Cormark") acted as financial advisor and McMillan LLP and Minter Ellison LLP acted as legal counsel to PharmaCielo.

Cormark will receive a combination of cash and PharmaCielo Shares as compensation for acting as financial advisor to PharmaCielo.

EverBlu Capital acted as financial advisor and Steinepreis Paganin acted as legal counsel to Creso Pharma.

About PharmaCielo

PharmaCielo Ltd. (TSXV:PCLO) is a global company, headquartered in Canada, with a focus on ethical and sustainable processing and supplying of all natural, medicinal-grade cannabis oil extracts and related products to large channel distributors. PharmaCielo's principal (and wholly owned) subsidiary is PharmaCielo Colombia Holdings S.A.S., headquartered at its nursery and propagation centre located in Rionegro, Colombia.

The boards of directors and executive teams of both PharmaCielo and PharmaCielo Colombia Holdings are comprised of a diversely talented group of international business executives and specialists with relevant and varied expertise. PharmaCielo recognized the significant role that Colombia's ideal location will play in building a sustainable business in the medical cannabis industry, and the Company, together with its directors and executives, is executing on a business plan focused on supplying the international marketplace.

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements can be identified by the use of words such as, "expects", "is expected", "intends", "believes", or variations of such words and phrases or state that certain actions, events or results "may" or "will" be taken, occur or be achieved. Forward-looking statements include those relating to the acquisition by PharmaCielo of all of the outstanding Creso Pharma shares and listed options, the anticipated benefits of the combined companies, the anticipated commercialization of the four additional products in 2019 in the Creso Pharma pipeline, continued active sales in the thirteen countries, the expansion of proprietary strains registered for commercial cultivation, the mutual benefits of expanded expertise, cultivation and production capacity through additional fully licensed Colombian operations, the Acquisition enabling PharmaCielo to bring its Colombian oil production to market faster, the satisfaction of necessary terms to complete the Acquisition, including: receipt of necessary Creso Pharma shareholder approval of the Share Scheme and the Option Scheme, the approval of the Share Scheme and the Option Scheme by the Australian Court and the approval of the Australian Securities and Investments Commission, the approval of the TSX Venture Exchange of the Acquisition and the issuance of the PharmaCielo Shares thereunder, the execution of the Secured Bridge Loan and the related general security agreement and share pledge, the maturity of the Bridge Loan, and expectations relating to the timing of closing the Acquisition. Forward-looking statements are not a guarantee of future performance and are based upon a number of estimates and assumptions of management in light of management's experience and perception of trends, current conditions and expected developments, including assumptions related to the ability to successfully integrate the operations of the two companies, as well as other factors that management believes to be relevant and reasonable in the circumstances, including assumptions in respect of current and future market conditions, the current and future regulatory environment and future approvals and permits. Actual results, performance or achievement could differ materially from that expressed in, or implied by, any forward-looking statements in this press release, and, accordingly, you should not place undue reliance on any such forward-looking statements and they are not guarantees of future results. Forward-looking statements involve significant risks, assumptions, uncertainties and other factors that may cause actual future results or anticipated events to differ materially from those expressed or implied in any forward-looking statements.Except as required by law, PharmaCielo undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this press release.

SOURCE PharmaCielo Ltd.

For further information: www.PharmaCielo.com; Investor Inquiries: Jonathan Ross, LodeRock Advisors Inc., PharmaCielo Investor Relations, 416-283-0178, [email protected], [email protected]; Media Relations: International: Gal Wilder, Cohn & Wolfe, +1.647.259.3261, [email protected]; Colombia: María Paula Peña Fdz., SPR GROUP S.A., PBX: 57-1 2877234, [email protected]

Related Links

http://www.pharmacielo.com

