Cannabis M&A Update: Aurora, TerrAscend, SNDL, Curaleaf and… a Costly Rise in Preferred Shares?
On Thursday, Cantor Fitzgerald analyst Pablo Zuanic provided an industry update on four recent M&A transactions and Glasshouse's Series B preferred stock issuance.
Strong points Zuanic said the deal between Curaleaf Holdings Inc. CRBLF and Four20 Pharma stands out from the rest because it could have the greatest long-term strategic implications "especially if Curaleaf International goes for a NASDAQ listing (in the event that the American MSOs have no line of sight by registering themselves). Regarding SNDL SNDL's purchase of Valens VLNS, Zuanic said the deal helps the company grow its Canadian recreational moat, more than doubling the recreational share and significantly increasing its merchandising business. "The challenge will be to make Valens profitable," he said. Likewise, he praised Aurora Cannabis ACB for buying 50.1% of Bevo Farms (a propagator) and called the deal "the best way for the company to create value for the closure of the facility." Sky". Regarding TerrAscend TRSSF expanding its business footprint in Michigan, Zuanic noted that the move "goes against the grain for an MSO, (...) in what is a growing but challenging market." Likewise, he noted that the company's retail network in Michigan "outperforms in terms of revenue per store." Beyond M&A, Zuanic reviewed Glasshouse's Series B preferred stock issuance (25% dividends by year 4 plus warrants with strike prices 2x market price) versus Pharmacielo debentures (11% coupon; warrants with strike prices 3.4 x current market price). SNDL expands its footprint in the leisure marketSNDL continues to expand its Canadian base by acquiring Valens. On 8/22/22, Sundial Growers, also known as SNDL, announced that it would acquire The Valens Company in an all-stock transaction (0.3334 SDNL shares will be issued for each Valens share at closing), which at the time of the announcement was worth C$138 million (SNDL already owned 6.2 million shares of VLNS for a 7.8% stake), for a 10% premium to the VWAP of 30 days.
Close is scheduled for January 23.
Aurora sees strategic value in the spreadAurora enters the spread segment and keeps half of Sky, for a different use now. In mid-May, Aurora announced that it would be closing its flagship Sky facility in Edmonton (one of the largest greenhouse cannabis cultivation sites in the world), as part of its cost-cutting efforts. p>
Although Sky's assets will be divested (which could be recovered), ACB will retain 50.1% of Sky. "As the best value creation option for Sky, according to management, ACB will pay C$42 million (after allowances) in cash for a 50.1% stake in Bevo Farms (one of the largest providers of vegetables and ornamentals propagated in North America), plus up to $12 million in earnouts over time,” Zuanic said.
Bevo will buy Sky from ACB for C$25 million payable in royalties once Sky becomes operational again.
As the cannabis industry evolves, ACB management sees an attractive economy in spread and horizontal integration, due to the limited supply and high demand of the overloaded culture segment.
"Bevo operates 63 acres of greenhouses in British Columbia, supplies greenhouses, nurseries, farms and wholesalers, and has generated $9 million in EBITDA over the past 12 month to 6/30/22 ($39m in revenue); on the other hand, ACB generated -$49m in EBITDA in the March quarter,” Zuanic said. TerrAscend doubles over Michigan
Enabled...
On Thursday, Cantor Fitzgerald analyst Pablo Zuanic provided an industry update on four recent M&A transactions and Glasshouse's Series B preferred stock issuance.
Strong points Zuanic said the deal between Curaleaf Holdings Inc. CRBLF and Four20 Pharma stands out from the rest because it could have the greatest long-term strategic implications "especially if Curaleaf International goes for a NASDAQ listing (in the event that the American MSOs have no line of sight by registering themselves). Regarding SNDL SNDL's purchase of Valens VLNS, Zuanic said the deal helps the company grow its Canadian recreational moat, more than doubling the recreational share and significantly increasing its merchandising business. "The challenge will be to make Valens profitable," he said. Likewise, he praised Aurora Cannabis ACB for buying 50.1% of Bevo Farms (a propagator) and called the deal "the best way for the company to create value for the closure of the facility." Sky". Regarding TerrAscend TRSSF expanding its business footprint in Michigan, Zuanic noted that the move "goes against the grain for an MSO, (...) in what is a growing but challenging market." Likewise, he noted that the company's retail network in Michigan "outperforms in terms of revenue per store." Beyond M&A, Zuanic reviewed Glasshouse's Series B preferred stock issuance (25% dividends by year 4 plus warrants with strike prices 2x market price) versus Pharmacielo debentures (11% coupon; warrants with strike prices 3.4 x current market price). SNDL expands its footprint in the leisure marketSNDL continues to expand its Canadian base by acquiring Valens. On 8/22/22, Sundial Growers, also known as SNDL, announced that it would acquire The Valens Company in an all-stock transaction (0.3334 SDNL shares will be issued for each Valens share at closing), which at the time of the announcement was worth C$138 million (SNDL already owned 6.2 million shares of VLNS for a 7.8% stake), for a 10% premium to the VWAP of 30 days.
Close is scheduled for January 23.
Aurora sees strategic value in the spreadAurora enters the spread segment and keeps half of Sky, for a different use now. In mid-May, Aurora announced that it would be closing its flagship Sky facility in Edmonton (one of the largest greenhouse cannabis cultivation sites in the world), as part of its cost-cutting efforts. p>
Although Sky's assets will be divested (which could be recovered), ACB will retain 50.1% of Sky. "As the best value creation option for Sky, according to management, ACB will pay C$42 million (after allowances) in cash for a 50.1% stake in Bevo Farms (one of the largest providers of vegetables and ornamentals propagated in North America), plus up to $12 million in earnouts over time,” Zuanic said.
Bevo will buy Sky from ACB for C$25 million payable in royalties once Sky becomes operational again.
As the cannabis industry evolves, ACB management sees an attractive economy in spread and horizontal integration, due to the limited supply and high demand of the overloaded culture segment.
"Bevo operates 63 acres of greenhouses in British Columbia, supplies greenhouses, nurseries, farms and wholesalers, and has generated $9 million in EBITDA over the past 12 month to 6/30/22 ($39m in revenue); on the other hand, ACB generated -$49m in EBITDA in the March quarter,” Zuanic said. TerrAscend doubles over Michigan
Enabled...
What's Your Reaction?
