🛒M&A Spree Continues

Ayr Strategies — $290M acq. of Liberty Health Sciences (FL), $111M acq. of GSD (NJ). Columbia Care $240M acq. of Green Leaf Medical (PA, MD, VA, OH). Casa Verde $95M Fund II.

Investors are rewarding smart acquisitions, with Ayr (AYRWF) and Columbia Care (CCHWF) up 9% and 31%, respectively since announcing their acquisitions last Tuesday before market open (12/22/20).

  1. While both acquisitions touted ~4.8x EV/EBITDA multiples, it seems like Columbia Care was rewarded more handsomely for the multiple being on 2021E EBITDA vs. 2022E EBITDA for Ayr.

  2. This should continue to drive M&A as sellers become more comfortable taking stock and encouraging for MSOs to pursue deal conversations.

  3. It seems like every major MSO now has a FL strategy except Cresco Labs, so speculation is that they may pursue Bluma Wellness or buy assets piecemeal from struggling MSOs (MedMen, iAnthus) in the State.


🌿Industry

Lantern — first Platform to offer Recreational Cannabis Delivery in CO. Residents of Aurora, whose City Council passed a vote in favor of recreational delivery on December 21st, will likely be the first in the state to access Lantern's services once the city finalizes the permitting process next year. Lantern is an independently operated subsidiary of Drizly Group, the largest online marketplace and delivery service for alcohol in North America and a market leader in Colorado. Lantern also plans to operate in its home market (MA) and MI in 2021.

While Aurora is so far the only Colorado municipality to approve recreational delivery, a Denver advisory board recently published a set of proposed updated marijuana business ordinances that the city could follow to opt into recreational and medical marijuana delivery. If Denver does, that might allow dozens of dispensaries in the Mile High City to deliver to Aurora.

Canopy Growth says GW Pharma infringed on CBD Extraction Patent in Federal Lawsuit. The legal action came on the same day that the U.S. Patent and Trademark Office issued a new patent to Canopy that gives it broad and exclusive rights to a process of extracting cannabinoids from plant material in the U.S. That issuance is giving Canopy more leverage to pursue litigation and potentially receive damages from GW if the suit plays out in its favor. Canopy’s original patent—which was issued in 2014 (and initially filed as an international patent application in 2001)—was more narrow and gave companies like GW leeway to adopt their own extraction practices that fall outside the scope of the patent.

Canopy is claiming that GW’s infringement of a patented extraction method “has been and continues to be willful and deliberate.” Because of this infringement, “Canopy has suffered and continues to suffer damages and irreparable harm,” the suit says. The looming issue for the industry is that, unless GW is able to prove that the patent is invalid, that could mean Canopy would have exclusive rights to an extraction process that is widely used across the market—leaving any company that relies on this method at risk of litigation.

In reversal, L.A. says no enforcement against nearly 60 marijuana firms with expiring permits. Los Angeles marijuana industry regulators have given at least 57 companies a new lifeline, only days after saying the licensed businesses in question won’t be allowed to conduct any commercial cannabis activity after New Year’s Eve. In an email sent by the L.A. Department of Cannabis Regulation (DCR) to at least 57 license holders whose permits expires on 1/1/21, the agency said it “will not proactively report the expired status of any licenses to the Los Angeles Police Department (LAPD) or state agencies, or participate in an enforcement action related to the expiration of the license against any applicants/licensees until 3/1/21.”

Cannabis banking reform excluded from $900B coronavirus relief package. But there is still hope cannabis banking reform will be included if there’s a push for additional COVID-19 stimulus after President-elect Joe Biden assumes office in January, said David Mangone, director of policy for The Liaison Group, a Washington DC firm that lobbies for the National Cannabis Roundtable.

FeaturedCustomers Customer Success Report on Dispensary Management Software. Ranking is based on data from customer reference platform, market presence, web presence, & social presence as well as additional data aggregated from online sources and media properties. Ranking engine applies an algorithm to all data collected to calculate the final Customer Success Report rankings. The overall Customer Success ranking is a weighted average based on 3 parts: Content, Market Presence, and Company.

Other highlights:

U.S. Cannabis Sales approach $18B, up 67% from 2019

MD Lawmaker Files Marijuana Legalization Bill Ahead Of 2021 Session

Why MSOs Are the Gift That Is Likely to Keep Giving

MI Cannabis Market could reach $3B, 4M customers within 3 years 

Oklahoma leads nation in marijuana cultivation licenses issued in 2020

2021: What comes next — Ross Lipson (Dutchie CEO)

Industry predictions for 2021 (Podcast) — Roy Bingham (BSDA Chairman)

NCV interview with Indus Holdings Chairman George Allen


💵Deals

Casa Verde raises $95M Fund II. Portfolio companies include Proper, Metrc, Dutchie, Bespoke Financial, Vangst, Leaflink, Greenbits, OCT, Indose, Miss Grass, Greentank, Eaze, Merry Jane and Cargocast. Exited investments include Cannalysis and Trellis. Fund I was $45M (January 2018).

Ayr Strategies — expand footprint with FL and NJ acquisitions. $290M all-stock acquisition of Liberty Health Sciences (FL) and $111M for Garden State Dispensary (NJ).

Liberty shareholders will receive 0.03683 Ayr shares for each Liberty share held, equating to ~13.1M new Ayr shares. Total purchase price is equivalent to $290M (~4.8x 2022E adjusted EBITDA) based on the closing price of Ayr shares as of December 21, 2020. Liberty has a 387-acre cultivation campus in Gainesville, FL with 300,000+ sq. ft. of current production facilities in operation; 28 open retail dispensaries, 7 completed and ready-to-open dispensaries, and 7 dispensaries currently under construction. Liberty currently employs 335 people, all of whom are expected to be retained.

Garden State Dispensary (GSD) is one of the 12 existing vertical license holders in the State of New Jersey and one of the state’s original six alternative treatment centers (ATCs). GSD has 3 open dispensaries and 30,000 sq. ft. of cultivation and production facilities in operation. An additional 75,000 sq. ft. is currently under construction. GSD currently employs 110 people, all of whom are expected to be retained. Total up-front consideration of $101M (~4x 2022 adjusted EBITDA) includes $41M cash, $30M in stock and $30M in the form of a promissory note. Earn-outs based on exceeding revenue target thresholds in 2022 will be capped at a maximum of $97M and payable in a combination of cash, promissory notes and exchangeable shares.

Columbia Care to acquire Green Leaf Medical for $240.0M. $45.0M cash, $195.0M stock (~4.8x 2021 Adjusted EBITDA) with the potential for additional performance-based milestones in 2022 and 2023. The transaction is immediately accretive to Columbia Care’s Gross Margin, Adjusted EBITDA and FCF. Green Leaf Medical (GLM) is a private MSO with assets/exposure in four US markets (PA, MD, VA, OH). Helps Columbia Care expand its footprint and operating scale in the East Coast and Mid-Atlantic, adding ~400,000 sq. ft. of Cultivation and Production capacity, 4 Operating Dispensaries and 6 Undeveloped, but Permitted Dispensaries, in Key Limited License Markets. Brings Vertical Integration in PA and MD and immediately positions Columbia Care as a leading Wholesaler.

Cannabis REIT AFC Gamma (AFCG) files IPO. AFC Gamma raised $80M this past summer from 20+ family offices. The preliminary prospectus disclosed another $12.3M in funding and $125K in Series A Cumulative Non-Voting Preferred Stock. The company also has a $40M line of credit. AFC Gamma has funded $92.5M in loans and have commitments for another $19.8M. The company has disclosed transactions with Nature’s Medicines, Curaleaf and Bluma Wellness. No borrowers were named in the prospectus, but the company mentioned loans and pending loans to 4 private and 3 public companies.

CapStone Holdings — $25M Term Loan in Ilera Healthcare (TerrAscend). CapStone is one of a group of investors in a $120M loan facility to enable Ilera's parent company — TerrAscend — to satisfy the final Ilera Healthcare earn-out payments, in connection with TerrAscend's acquisition of Ilera Healthcare, without the need for additional external funding. 

Other highlights:

Cresco Labs — extends distribution partnership with Kings Garden

Planet 13 — acceleration of Expiry Date of Outstanding PLTH.WT Warrants

HEXO — Lapse of $800M Base Shelf Prospectus that commenced on November 19, 2018


🏬New Store Openings / New Product Launches

Sunnyside (Cresco Labs) — Naperville, IL (10th in IL)

MÜV (AltMed/Verano) — Boynton Beach (29th in FL)

Rise (GTI) — Erie, PA (14th in PA, 52nd national)


💻Hiring

Garden Remedies — VP/Director of Finance (Newton, MA)

4Front Ventures — Financial Analyst (Phoenix, AZ)


🤷‍♂️Somewhat Relevant

A Vaping Billionaire Only Got Richer After China’s Online Ban. Since China banned online sales of e-cigarettes a year ago, the industry has grown offline. RELX Technology, the country’s largest operator, opened 1,000+ stores in the first half of 2020, and plans to add 10,000 outlets within the next three years. Its rival, Yooz, has also boosted the number of stores. That’s good news for Smoore International, the largest maker of vaping devices and components for brands around the globe. Its shares have more than quadrupled since its July debut, making it one of Hong Kong’s best-performing IPOs of the year.


👋 Newsletter curated by Dai Truong, who leads 🌿brand and 🏪retail acquisitions at Left Coast Ventures, a CA-based Cannabis holding company.