Labat Africa sells cannabis healthcare business to CEO and director

Labat Africa’s share price ended 20% higher on the JSE on Friday after it announced that it is selling its cannabis healthcare sector businesses to its CEO and a director.

Labat had first announced its intention to enter the cannabis industry in November 2019, which at the time was a novel business on the JSE, as cannabis had previously been illegal in South Africa, barring limited medical uses.

The company announced on Friday that All Trading Proprietary, a company beneficially owned by Labat’s CEO Brian Van Rooyen, plans to buy all of Labat’s cannabis-related subsidiaries and operating divisions.

Earlier this year, the company had announced that it was in talks with All Trading, a related party to the company, regarding the disposal of some of Labat’s subsidiaries.

However, on October 23, the company advised that these talks had been terminated, and a “binding agreement” had been entered into with 64P Investments Proprietary for the purchase of all the cannabis-related subsidiaries and operating divisions in the Labat Group.

Labat’s directors stated on Friday that 64P Investments had since withdrawn from the agreement, prompting Labat to re-engage with All Trading. 64P was not a related party to Labat in terms of the JSE listings requirements.

A new sale of shares and loan claims agreement has been concluded between Labat Africa and All Trading for the disposal.

All Trading is beneficially owned by two directors of Labat, namely the CEO and co-founder Brian Van Rooyen and David O'Neill, and is therefore classified as a related party in terms of the JSE Listings requirements.

“Following the withdrawal of the 64P Investments offer, the board approved the conclusion of this new agreement with All Trading on improved but commercially comparable terms to the prior transaction, for a total consideration of R23 million,” the directors said.

The consideration will be settled through partial repayment of existing loans owed to related parties.

Labat’s directors stated that the disposal would conclude Labat's “strategic exit” from cannabis and strengthen its balance sheet. The company intends to redeploy resources into ICT, logistics, and digital platforms.

Providing reasons for the disposal, the directors mentioned that the regulatory and operational risks associated with medicinal cannabis and retail had proven challenging, and the newly appointed board members did not wish to pursue cannabis investments.

“Accordingly, Labat Healthcare has been deemed non-core and held for sale during FY2025. Labat is pivoting towards technology and ICT, and the disposal supports this strategy by divesting of non-core assets,” the directors said.

“Recent acquisitions such as Classic International and Ahnamu provide a solid foothold in IT hardware and software distribution across Africa,” they added.

An independent professional expert has been appointed to provide an independent fairness opinion on the terms of the transaction.

The net asset value of the cannabis assets amounted to R5.29m, with a profit attributable to these assets of R17.52m for the reporting period before any impairments on the healthcare segment. An independent valuation from a JSE-accredited valuer placed the indicative valuation between R15m and R17m.

“The board (excluding related parties) considers the disposal beneficial to shareholders, as it exits an industry that is highly regulated and remains uncertain, reduces liabilities, and more importantly, enables focus on the core ICT strategy,” the board stated.

Visit:www.businessreport.co.za