🤝 TerrAscend acquires Gage Cannabis for $545M

Planet 13 acquires FL License from Harvest for $55M (cash). Ayr buys three PA dispensaries for $80M (up to $120M). GTI acquires GreenStar Herbals (MA).

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Trying to plan this month’s event around Hall of Flower — I’m thinking Breakfast/Lunch in SF and a Happy Hour in Santa Rosa on Tuesday, 9/21, reply to this email and let me know if' you’re interested in one or both and I’ll organize.


🌿Industry

Ex-Brooklyn assemblywoman tapped to lead N.Y. agencies regulating sale of recreational marijuana. Tremaine Wright, a Democrat who lost her seat in last year’s primaries, earned confirmation to chair the Cannabis Control Board and the Office of Cannabis Management, which were formed as part of a bill that legalized recreational use of marijuana in New York this spring. Chris Alexander, policy manager of Canada-based cannabis company Vill LLC, got the Senate’s approval to serve as the executive director of the agencies alongside her. Wright and Alexander were nominated to the posts by Gov. Hochul, who called the legislature back for a special session Wednesday to deal with the vacancies and the state’s expiring eviction moratorium.

The cannabinoid CBN might be cannabis industry’s surprise hit.

While delta-8 THC is certainly stealing the spotlight, CBN might just be the sleeper cannabinoid of the summer – pun intended. Over the past year, cannabis companies have been leveraging the compound’s reputation as a sleep aid with growing success. Also known as cannabinol, CBN was first discovered nearly a century ago. Over that period, companies have done little with CBN, given the time-consuming process of producing the cannabinoid. But that is now changing, thanks to the development of new production methods. And demand is climbing. Sales of products containing CBN – almost entirely edibles, at this point – totaled more than $65 million in the past four quarters for adult-use retailers in California, Colorado, Nevada and Oregon, according to data provided by Headset and FloraWork. It’s important to note one dissenting voice on this is Ciencia Labs, whose Chief Scientific Officer, Carolina Vazquez Mitchell, has disputed the science behind CBN.


💵Deals

TerrAscend — Acquires Gage Cannabis for $545M, an 18% premium.

Under the terms of the Arrangement Agreement, shareholders of Gage will receive 0.3001 of a common share of TerrAscend for each Gage Share (or equivalent) held (Exchange Ratio), representing a total consideration of approximately $545 million based on the closing price of TerrAscend on August 31, 2021. The Exchange Ratio implies a consideration of $2.11 (or C$2.66) per Gage Share, representing a 18% premium based on the closing prices of both companies' shares on the CSE on August 31, 2021. Upon completion of the Transaction, the combined business will have operations in 5 states and Canada, including 7 cultivation and processing facilities and 23 operating dispensaries serving both medical and adult-use cannabis markets in the U.S. and Canada.

Key Transaction Highlights and Benefits:

  • Leadership in a Top 3 Market: Gage has established itself as a leader in the Michigan market, which is the third largest cannabis market in the U.S. with reported cannabis sales of $171 million in the month of July 2021, representing an annualized market size of ~$2.1 billion

  • Premium Brands: The Transaction will provide access to Gage’s sought-after brand and proprietary library of genetics as well as Gage’s exclusive licensing partnerships in Michigan with COOKIES, SLANG Worldwide, Blue River, Pure Beauty, and Khalifa Kush

  • Efficient Operating Model: The combined company will operate 7 cultivation facilities, including 3 cultivation facilities in Michigan, in addition to Gage’s 9 contract grow agreements

  • Expanding Retail Footprint: The combined company will operate a retail network expected to reach 34 stores over the coming months. This includes 23 currently open dispensaries across 5 states with Gage operating 10 dispensaries in Michigan in addition to TerrAscend’s 13 store footprint in key markets including California, New Jersey and Pennsylvania. TerrAscend is expected to open its 14th dispensary in the fourth quarter in Lodi, New Jersey and Gage is expected to open 10 additional dispensaries across Michigan in the coming months

  • A Leader in Experiential Retail: Gage’s award-winning retail stores generate industry leading retail metrics, including strong average basket size ($152 in Q2 2021) and premium pricing for its flower products (40%+ relative to the Michigan market average price). TerrAscend expects to leverage Gage’s portfolio of over 40+ proprietary flower strains in addition to brand and marketing capabilities, at retail locations in other states

  • Expert Operating Teams: The Transaction combines management teams with similar core philosophies, strong track records of execution and operational expertise in building leading businesses in the most competitive cannabis markets in the country

  • Balance Sheet Strength: Gage’s $32.8 million cash position with minimal debt as of June 30, 2021, combined with TerrAscend’s strong balance sheet, positions the combined company to execute on its growth plans.

Ayr Wellness — Acquires PA Natural Medicine for up to $120M. PA Naturals has locations in the college towns of Bloomsburg and State College, as well as Selinsgrove, PA and operates under the retail banner “Nature’s Medicine”. The acquisition is expected to close in Q4 2021 and the Company expects to rebrand the dispensaries under the AYR Wellness banner shortly after closing. The terms of the transaction include upfront consideration of $80 million ($20 million stock, $25 million seller notes and $35 million cash). An earn-out of up to $40 million, based on 2021 EBITDA hurdles, is payable in Q1 2022 and includes a maximum additional cash payment of $10 million with the remainder paid in stock and notes. The three Ayr Wellness stores, opened an average of less than six months, are run-rating at over $7 million in annualized revenue per dispensary.

GTI — Expands Retail Footprint in Massachusetts Through Acquisition of GreenStar Herbals. GreenStar Herbals has two operational adult-use retail stores in Dracut and Maynard, with a third to open in Chelsea this year, and three medical-use retail stores in Amherst, Boston and West Springfield. GTI’s existing Rise Amherst store reverted to a medical cannabis store in August. Adult-use cannabis sales in the state have reached ~$755 million so far in 2021 and is projected to reach $1.2 billion by the end of the year.

Harvest Health & Recreation — Planned Divestiture of Florida License for $55M. Planet 13 Holdings has agreed to purchase the license for $55 million in cash. The planned divestiture includes the sale of the license only and does not include any planned or operational facilities. Closing of the divestiture of the Florida license remains subject to the customary satisfaction of closing conditions including regulatory approvals and the closing of the planned acquisition of Harvest by Trulieve. As of August 26, 2021, there were 22 companies with MMTC licenses with 371 dispensing locations across Florida. License holders are not subject to restrictions on the number of dispensaries that may be opened or on the number or size of cultivation and processing facilities they may operate.

Forian — $24M Private Placement of 3.5% Convertible Notes due 2025. Forian is the parent company of BioTrack and Cannalytics, The Company has entered into a convertible note purchase agreement with a select group of institutional and accredited investors pursuant to which the Company will issue  $24M aggregate principal amount at 100% of par value of its 3.5% convertible notes due 2025. The Notes are convertible into (i) shares of the Company's common stock at a conversion price of $11.98, the consolidated closing bid price of the Company's common stock as reported by the Nasdaq on Tuesday, August 31, 2021, the last trading day preceding the Company's execution of the Note Purchase Agreement and (ii) warrants to purchase the number of shares of the Company's common stock equal to (a) 20% of the converted principal amount, divided by (y) the Conversion Price, which warrants will have an exercise price equal to the Conversion Price and will terminate at the maturity date. Interest will be added to the principal amount of the Notes and paid in kind upon conversion or in cash upon redemption at or prior to the September 1, 2025 maturity date.

Greenlane and KushCo — Complete Merger, Creating Leading Ancillary Cannabis Company and House of Brands. The Company’s Class A common stock will continue to trade on the Nasdaq Global Market under the ticker symbol “GNLN”. Each KushCo stockholder is entitled to receive 0.3016 of a Greenlane Share for each share of KushCo common stock held on August 31, 2021, the effective date of the Transaction. Holders of Greenlane Shares prior to the completion of the Transaction will continue to hold their Greenlane Shares with no adjustment as a result of the Transaction.

The Valens Company — Acquisition of Verse Cannabis and Creates Top Tier Canadian Licensed Producer. Verse acquisition, in conjunction with the recently announced agreement to acquire Citizen Stash, propels Valens into a top tier market share position in Canada with over 220 listings in 7 provinces and territories under its brands, while remaining a partner of choice for third-party custom manufacturing. Pro forma Valens will be comprised of Verse, a leading value brand, Citizen Stash, the #1 brand in flower and the #3 brand in pre-rolls over $13.00/gram, as well as its existing best-in-class, low-cost product manufacturing platform.


📄Company Updates

Petalfast — Launches Incubator Program. Pilot by Petalfast provides new and recently launched brands with direct access to leading retailers and opportunities to gain first-hand market analysis, while also offering select retailers the opportunity to see future brands before they formally hit the market. By incentivizing both brands and retailers, emerging companies can leverage Petalfast’s relationships and decades of brand-building expertise to create an executable go-to-market strategic plan. The launch of this program also will provide brands with up to fifty face-to-face meetings with leading retailers throughout the State of California.


🏬Retail

Trulieve — Brings Medical Cannabis to Oviedo, FL. The new dispensary is Trulieve's 91st location in Florida. 


🌱Product

Goodness Growth Holdings — Subsidiary Resurgent Biosciences Receives Patent for Cannabis-Based Moist Snuff Products. The United States Patent and Trademark Office (USPTO) has issued a Notice of Allowance for Resurgent Biosciences’ patent application titled, "Cannabis Based Moist Snuff." This patent covers both the product delivery format and the process for creating a moist snuff from cannabis plants.
Cannabis-based snuff products present an opportunity to commercialize a new cannabis product form factor in a delivery format that already has proven appeal to consumers in the multi-billion-dollar tobacco industry, in which moist snuff is the highest selling smokeless product category. The patented process will allow Resurgent Biosciences and its license holders to monetize future cannabis snuff products and brands through the creation of new revenue stream opportunities in both the retail and wholesale sales channels.

Kiva Confections — ambitious multi-state expansion. Through the end of 2021, Kiva will enter two new states and broaden its product portfolio in several markets that currently offer select products from the brand.

Kiva’s multi-state rollout includes:

  • MASSACHUSETTS: Marking its official state debut in early August 2021, Kiva is partnered with the vertically-integrated Revolutionary Clinics

  • NEVADA: Kiva’s ground-breaking strain-specific, 100% live resin-infused edibles line Lost Farm will launch in Fall 2021

  • ILLINOIS: Kiva has recently renewed a successful partnership with Cresco Labs, with several exciting products anticipated for release in the coming months

  • OKLAHOMA: On the heels of its successful Kiva Bars and Camino Gummies launch in July 2021, Kiva forecasts launching both Terra Bites and Petra Mints by the end of the year in partnership with the Tulsa-based, vertically-integrated company 24K Labs

  • MICHIGAN: Launched Camino in May of this year to great success with one of the leading vertical operators in the state, High Life Farms

  • OHIO: Kiva, Terra, Camino, and Petra launched in January of 2021 with Klutch, one of Ohio’s leading Level 1 Medical Marijuana Cultivators and Processors, quickly making Kiva the third largest edible brand in the state

Wana Brands — Launches Wana Optimals Fast Asleep.

Each Fast Asleep gummy contains 10mg CBD for calming and relaxing effects, and promoting REM sleep; 2mg CBN, which can lower stress, relieve tension, and alleviate physical discomfort; 2mg CBG for its relaxing and anti-inflammatory effects; 2mg THC, which works with the CBD to help regulate the body’s circadian rhythm; 1mg Melatonin, a sleep hormone to enhance the effects of these powerhouse cannabinoids; 30+ Specialized Terpenes, chosen via extensive user research for their sleep-promoting properties. 

The ultimate guide to cannabis stash boxes. DiscreetSmoker, FlavorFix, GrassCity, SkyHigh, Volant.


🧔People | 💻Hiring

FORIAN — Appoints Michael Vesey as CFO. Vesey will succeed Clifford Farren, who will remain with Forian in an advisory capacity through the end of the year to ensure an orderly transition. Vesey was most recently the CFO of Wayside Technology Group (Nasdaq: WSTG), a provider of cyber security, software and technology solutions. During his five-year tenure with Wayside, Vesey led multiple acquisitions that facilitated the organization’s shift to cloud marketplace, resulting in a significant increase in average share price over a two-year period. Prior to Wayside, Vesey spent nine years at Majesco Entertainment Company growing from the company’s Chief Accounting Officer to CFO.


🎙️Interviews

Cheddar News — Jane Technologies, CEO, Socrates Rosenfeld

Cannabis Investing Network — Q2 2021 Financial Review of the Big 5 MSOs (ft. Nick Gastevich aka CannaVestments)

Schwazze — Cannabis Investing for Grown Ups


👋 Highly Objective is curated 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.