🚙🐉 Eaze to Acquire Green Dragon, Executing on Vertical-integration Plans

The combined company will operate 42 delivery and storefront retail locations across CA, CO, MI, and FL, and serve markets with a combined value of nearly $10 Billion.

Press Release

Transaction Highlights / Thoughts:

💭 This is a big swing for Eaze, which puts it right into conversations with MSOs as a Company that will soon compete for Top 10 Revenue status ($54M+ Quarterly Revenue, which it might already be with this acquisition). After raising ~$200M (last round was $35M Series D in February 2020), the Company laid out plans to verticalize early last year to capture the GMV (transactions) that was flowing through its platform. Eaze CEO, Ro Choy, mentioned to Business Insider that they are in market for a $75M Series E raise ($700M pre-money valuation), with 80% of the capital already committed. Seems like the combined company is well set up with regards to retail in CO & FL so the company will likely spend some of the $75M+ to go deeper into retail in CA (where Eaze has acquired delivery depots but will start getting into conversations for dispensaries as well) & MI ($171M in July 2021 Retail Sales with multiple Companies operating 10+ provisioning centers).

🚙🏬🌿💨 Synergies. Eaze brings best-in-class technology and delivery expertise while Green Dragon adds cultivation and retail expertise. Eaze has completed 7.6 million deliveries to-date, 2M registered customers, and $190 million in LTM transaction value. Eaze’s average monthly revenue increased 75% between 2019 and 2020. Green Dragon dispensaries have handled more than one million transactions in 2020, with Colorado stores growing 39% in 2020.

📱 Data to Grow / Launch brands. Eaze carries over 100 brands and 600 individual products on its menu. The company currently has a private label portfolio that includes Circles, Everyday, Lost Lotus, Sugarhigh, Magnus Concentrates, Tropix, Le Remedie, Fuel, Bleezy Blunts, and Panama Gold. The acquisition likely means the combined company will continue to push its private label portfolio at retail and through delivery, while also investing in brand refreshes.

☀️ Rapid Entry into Florida, with chance to win Delivery. Trulieve reported (as of 3/1/21) that only 4% of orders came from Delivery, with 45% Walk-in, and 51% Pickup. There’s a good chance that Eaze/Green Dragon can convert those customers that prefer the convenience of pickup over to delivery as well. In July, Green Dragon announced the opening of its first two Florida dispensaries, and plans to have at least 20 locations secured in Florida by the end of 2021. Assuming Eaze/Green Dragon can operationalize the 20 locations by end of year 2022 and limited growth in locations from GrowHealthy, Columbia Care, MedMen, the company should be around 8th in dispensary locations. More importantly, the Company can win market share when it comes to cannabis sold (i.e. Curaleaf sells 2x more than Ayr Wellness/LHS even with 2 less locations). Seems like the company can make a quick dent by just offering free delivery, as most charge $15-25 fees.

🚗 Win Delivery in Colorado / Omnichannel Experience. Colorado only recently started to allow delivery, with the first Denver dispensary approved for delivery being Strawberry Fields last month (social equity applicants for delivery will be given exclusive access for the next three years). Native Roots acquired a delivery permit in Boulder last year, where working with social equity businesses is not required. One of the other larger operators in Colorado, LivWell, has yet to indicate whether or not it will pursue delivery. Schwazze (Star Buds) with 19 dispensaries in the State have also not spoken about delivery plans. Eaze’s technology and delivery experience should help the company to quickly win market share. Green Dragon has 15 dispensaries in Colorado (Aspen, Auorra (2), Boulder, Breckenridge, Capitol Hill, Cherry Creek, Denver (3), Edgewater, Greenwood Springs (2), Telluride, Thornton). Colorado Cannabis sales totaled $2.2B in 2020 and is on track for $2.3B in 2021.

👋 Highly Objective post by Dai Truong. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment.  The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party.  The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.