Transaction Follows Recent Acquisitions of
U.S. Based FAB CBD and U.K. Based Blessed CBD
- Acquisition boosts High Tide's current U.S. revenue run
rate by ~40% to approximately C$70
Million.
- Highly accretive transaction for shareholders, as NuLeaf
generated revenue of US$19.4 Million and Adjusted
EBITDA1 of US$5.26 Million during the 12 months ended
September 30, 2021, of which
direct-to-consumer e-commerce revenue represented US$16.3 million.
- NuLeaf has a strong financial profile which generated 71%
gross margins and 25% Adjusted EBITDA1 margins in
2020.
- NuLeaf continues to drive innovation in the cannabinoid
market through their new Multicannabinoid™ oils and softgels.
NuLeaf's Multicannabinoid™ is a comprehensive formula designed to
supercharge the endocannabinoid system. This blend contains several
key cannabinoids including CBD, CBG, CBN, and CBC in a balanced
profile.
- NuLeaf's cGMP-certified facility enables them to
manufacture groundbreaking cannabinoid formulations while exceeding
the highest levels of regulatory compliance. High Tide intends to
utilize this facility to achieve manufacturing synergies with FAB
and Blessed CBD, and to launch Multicannabinoid™ SKUs across those
platforms.
- NuLeaf ranked sixteenth on the prestigious 2020 Inc 5000
list of the fastest growing private companies in the United States. This marked the second year
in a row the Denver-based company
appeared in the list's top twenty, showing a remarkable three-year
growth of 11,495 percent.2
- NuLeaf has a strong distribution reach in the natural
products channel and recently announced an expansion with Sprouts
Farmers Market from 33 retail locations to an additional 235
stores, bringing this to a total of 268 Sprouts stores, in addition
to other retail accounts across the U.S.
CALGARY, AB, Nov. 22, 2021 /PRNewswire/ - High Tide Inc.
("High Tide" or the "Company") (TSXV: HITI) (Nasdaq:
HITI) (FRA: 2LYA), a leading retail-focused cannabis company with
bricks-and-mortar as well as global e-commerce assets, is pleased
to announce that it is taking another step towards solidifying
itself as a major player within the global marketplace for
hemp-derived CBD products, by entering into a definitive agreement
(the "Acquisition Agreement") pursuant to which High Tide
will acquire 80% of NuLeaf Naturals, LLC ("NuLeaf"), for
US$31.24 Million (the
"Transaction"), and will have a three-year option to acquire
the remaining 20% of NuLeaf at any time.
Founded in 2014 with its headquarters in Denver, Colorado, NuLeaf is a market leader in
the production and distribution of premium cannabidiol (CBD)
wellness products. It has received over 25,000 verified 5 star
customer reviews through its e-commerce platform. NuLeaf can
produce 60,000 plant-based softgels per hour and is one of only a
few manufacturers in the United
States that can produce a vegan softgel. With a heightened
consumer interest in health focused and sustainable products,
plant-based offerings are primed for growth. NuLeaf has a strong
distribution reach in the natural products channel and recently
secured an expansion with Sprouts Farmers Market from 33 retail
locations to an additional 235 stores. It has quickly grown to
become one of the most popular brands for hemp-derived CBD products
across the U.S., with their product portfolio including cannabinoid
tinctures, softgels, and topicals. Over the 12 months ended
September 30, 2021, NuLeaf had over
5.1 million site visits3 and an average order value of
US$120. Since its inception, NuLeaf
has served approximately 330,000 unique customers through its
e-commerce platform, and hundreds of thousands more through their
other distribution channels.
"With this announcement, we have doubled down on our efforts to
become a global market leader with respect to hemp-derived CBD
production and e-commerce sales. Our strategy is backed by numerous
studies which predict that the global CBD market is set to grow
exponentially over the coming years, with Fortune Business Insights
projecting that it will reach US$56
billion by 2028, equating to a compound annual growth rate
of 47%. High Tide is growing across all three categories within the
cannabis ecosystem, including THC, CBD, and accessories. With the
purchase of NuLeaf, we are now further vertically-integrated in our
CBD business, just like we have been with regard to consumption
accessories. As international markets open up and as export
regulations evolve, NuLeaf's cGMP-certified facility positions us
to take advantage of the global CBD business opportunity," said Raj
Grover, President and Chief Executive Officer of High Tide.
"Additionally, NuLeaf has developed customized manufacturing
technology for vegan softgels, establishing them as one of very few
manufacturers in the U.S. with this capability. Their portfolio
also includes other innovative products including their
Multicannabinoid oils and softgels.This transaction will provide us
with meaningful cross-selling synergies and margin enhancement
opportunities for FAB and Blessed CBD. Bo, Jaden, and the entire
NuLeaf team have done an exceptional job in building NuLeaf into
one of the most popular and leading CBD brands in the U.S., and I
am very excited to welcome them into our growing High Tide family,"
added Mr. Grover.
"We are excited to partner with Raj and the High Tide team to
deliver the highest quality cannabinoid products in the world,"
said Bo Shirley, Co-founder of
NuLeaf Naturals. "Utilizing the latest in cannabinoid research, we
continue to drive innovation and growth by launching unprecedented
products that revolutionize the market. High Tide is a global
leader in cannabis and together we look forward to expanding our
market share and building the future of this industry."
"This strategic alignment with High Tide will enable us to
continue to deliver exceptional value to our customers and retail
partners," said Jaden Barnes,
Co-founder of NuLeaf Naturals. "As part of the High Tide
organization, we are well positioned to take the next steps in our
growth strategy while maintaining our laser focus on delivering a
world-class cannabis experience."
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1
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Adjusted EBITDA
(earnings before interest, taxes, depreciation, and amortization)
does not have a standardized
meaning prescribed by IFRS.
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2
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Source:
https://www.inc.com/inc5000/2020.
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3
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Data from Google
Analytics
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STRATEGIC HIGHLIGHTS
Accelerates High Tide's global CBD exposure – While
High Tide has been in the CBD sector since launching CBDCity in
May 2020, and has been gradually
increasing its international footprint, including through the
acquisitions of FAB CBD and Blessed CBD in 2021, the addition of
NuLeaf will solidify its position as a major CBD player globally.
Pro forma following the acquisition of NuLeaf, the Company's annual
revenue run rate outside of Canada
will be approximately C$80
Million.
High degree of synergies with FAB and Blessed CBD
– High Tide intends to pursue a range of synergies between
NuLeaf and the FAB and Blessed CBD platforms, including co-packing
and shipping products from NuLeaf's state-of-the-art cGMP-certified
facility, bulk purchasing materials collaboratively to save on
costs, creating new product lines such as FAB and Blessed CBD
Multicannabinoid™ oils and softgels, initiating joint marketing
efforts, and combining the e-commerce strengths of all three
platforms.
Immediate synergies and cross-selling
opportunities – High Tide plans to offer NuLeaf products
on its other U.S. e-commerce platforms, CBDCity, GrassCity and
Smoke Cartel, in the near-term. The Company will explore the
opportunity to bring the Multicannabinoid™ proprietary oils and
softgels to Canada and make them
available through High Tide's own network of 104 retail outlets,
subject to provincial and federal regulatory approvals. The Company
also intends to introduce these Multicannabinoid™ proprietary oils
and softgels into the E.U. market through Blessed CBD, as well as
through FAB CBD's network in the U.S.
Further strengthens High Tide's position in the e-commerce
space – NuLeaf carries multiple product formulations that
are exclusive to them. Over 80% of sales are direct-to-consumer
online from their website. Over the 12 months ended September 30, 2021, NuLeaf fulfilled
approximately 133,000 orders with an average order value of
US$120.
Highly accretive to financial results – Given its
large scale and high margin profile, NuLeaf generated gross margins
of 71% and Adjusted EBITDA1 margins of 25% during the 12
months ended September 30, 2021 –
both of which are highly accretive to High Tide's consolidated
margin profile.
Large global potential – Fortune Business Insights
recently reported that the global cannabinoid market is projected
to grow from just under US$3.7
billion to approximately US$58
billion by 2028, which represents a compound annual growth
rate of 47%.4 NuLeaf is well-positioned to take
advantage of the growing global interest in CBD products through
potential export opportunities for their proprietary formulations,
including Multicannabinoid™ vegan oils and softgels, which are
produced at their cGMP-certified facility in Denver, Colorado.
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4
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Source:
https://www.fortunebusinessinsights.com/cannabidiol-cbd-market-103215
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TRANSACTION DETAILS
The Transaction, which is an arm's length transaction, is
subject to, among other things, receipt of required TSX Venture
Exchange ("TSXV") approval, and other customary conditions
of closing, is expected to close in the coming weeks, implies an
enterprise valuation of US$39.05
Million, representing 7.1 projected 2021 Adjusted
EBITDA1 and recognition for US$1.7 Million recently spent on upgrading
NuLeaf's cGMP-certified facility. The consideration (the
"Consideration") for the 80% acquired will be US$31.24 Million in common shares of High Tide
("High Tide Shares") on the basis of a deemed price per High
Tide Share equal to the volume weighted average price per High Tide
Share on Nasdaq for the 10 consecutive trading days preceding
closing of the Transaction ("Closing"). Upon closing, NuLeaf
Naturals will have approximately US$500,000 of cash and inventory of approximately
US$500,000.
In addition to the foregoing, NuLeaf's owners have agreed to
grant High Tide an option to acquire all the remaining interests in
NuLeaf not held by High Tide, and become the sole owner of NuLeaf
(the "Call Option"), at an enterprise value equal to the
trailing twelve months of Adjusted EBITDA1 multiplied by
7.1. The Call Option will be exercisable at any time for a period
of three (3) years following the Closing. In addition, High Tide
has agreed to grant NuLeaf's owners an option to put to High Tide
the remaining interests in NuLeaf not held by High Tide (the
"Put Option"), at the same enterprise value of the Call
Option. The Put Option will be exercisable by NuLeaf's owners for a
period of eighteen (18) months following the eighteen (18) month
anniversary of the Closing. The consideration under the Call Option
or the Put Option, if exercised, will be satisfied in cash.
The High Tide Shares issued pursuant to the Consideration are
subject to a statutory hold period of four months and one day.
KPMG LLP conducted financial due diligence on behalf of High
Tide for the Transaction. Garfinkle Biderman LLP and
Sichenzia Ross Ference LLP acted for High Tide in connection with
the Transaction. NuLeaf was advised by Squire Patton Boggs
(US) LLP and Class VI Partners, LLC
in connection with the Transaction.
GRANT OF RESTRICTED SHARE UNITS
Furthermore, High Tide announced that its Board of Directors has
approved a grant of 65,472 restricted share units (the ("RSUs") to
certain directors, pursuant to the Company's restricted share unit
plan. Each RSU entitles the holder to acquire one common share of
the Company upon vesting.
ABOUT NULEAF NATURALS
NuLeaf Naturals is one of America's leading cannabinoid
companies. Since 2014, NuLeaf has been committed to creating the
world's highest quality cannabinoid products in their most pure and
potent form. NuLeaf's products are produced at a cGMP-certified
facility enabling them to manufacture groundbreaking cannabinoid
formulations while exceeding the highest levels of regulatory
requirement. The company is committed to creating safe, consistent,
and effective products and has proudly received over 25,000
verified 5-star customer reviews through their e-commerce platform.
NuLeaf also ranked sixteenth on the prestigious 2020 Inc 5000 list
of the fastest-growing private companies in the United States, with a remarkable
three-year growth rate of 11,495 percent.
ABOUT HIGH TIDE INC.
High Tide is a leading retail-focused cannabis company with
bricks-and-mortar as well as global e-commerce assets. The Company
is the largest Canadian retailer of recreational cannabis as
measured by revenue, with 104 current locations spanning
Ontario, Alberta, Manitoba and Saskatchewan, and was featured in the third
annual Report on Business Magazine's ranking of Canada's Top Growing Companies in 2021. The
Company is also North America's
first and only cannabis discount club retailer, featuring Canna
Cabana, Meta Cannabis Co., Meta Cannabis Supply Co. and NewLeaf
Cannabis banners, with additional locations under development
across the country. High Tide has been serving consumers for over a
decade through its established e-commerce platforms including
Grasscity.com, Smokecartel.com, Dailyhighclub.com, and Dankstop.com
and more recently in the hemp-derived CBD space through
CBDcity.com, FABCBD.com, and BlessedCBD.co.uk, as well as its
wholesale distribution division under Valiant Distribution,
including the licensed entertainment product manufacturer Famous
Brandz. High Tide's strategy as a parent company is to extend and
strengthen its integrated value chain, while providing a complete
customer experience and maximizing shareholder value. Key industry
investors in High Tide include Tilray Inc. (TSX: TLRY) (Nasdaq:
TLRY) and Aurora Cannabis Inc. (TSX: ACB) (Nasdaq: ACB).
Neither the TSXV nor its Regulation Services Provider (as that
term is defined in the policies of the TSXV) accepts responsibility
for the adequacy or accuracy of this release.
For more information about High Tide Inc., please visit
www.hightideinc.com, its profile page on SEDAR at www.sedar.com,
and its profile page on EDGAR at www.sec.gov.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information in this news release constitutes
forward-looking statements under applicable securities laws. Any
statements that are contained in this news release that are not
statements of historical fact may be deemed to be forward-looking
statements. Forward-looking statements are often identified by
terms such as "may", "should", "anticipate", "expect", "potential",
"believe", "intend" or the negative of these terms and similar
expressions. Forward-looking statements in this news release
include statements relating to: the ability of High Tide to
complete the Transaction; High Tide's ability to become a global
leader in the e-commerce marketplace for hemp-derived CBD products;
the ability of NuLeaf to produce 60,000 plant-based softgels per
hour; the growth in interest in health focused and sustainable
products; the ability of NuLeaf to complete the expansion into
Sprouts Farmers Market from 33 retail locations to an additional
235 stores; the growth of the global CBD market; the potential for
new markets to open up; the ability of the Company to integrate
NuLeaf with its other CBD brands; the ability of High Tide to offer
NuLeaf products across its other U.S. ecommerce platforms; and the
ability of NuLeaf to take advantage of the growing global interest
in CBD products through potential export opportunities for their
proprietary formulations.
Forward-looking information in this news release are based on
certain assumptions and expected future events, namely: that High
Tide will successfully complete the Transaction (and will obtain
all requisite approvals) on the terms and within the timelines
anticipated by High Tide; High Tide's financial condition and
development plans do not change as a result of unforeseen events;
there will continue to be a demand, and market opportunity, for
High Tide's product offerings; current and future economic
conditions will neither affect the business and operations of High
Tide nor High Tide's ability to capitalize on anticipated business
opportunities), although considered reasonable by management of
High Tide at the time of preparation, may prove to be imprecise and
result in actual results differing materially from those
anticipated, and as such, undue reliance should not be placed on
forward-looking statements.
These statements involve known and unknown risks,
uncertainties and other factors, which may cause actual results,
performance or achievements to differ materially from those
expressed or implied by such statements, including but not limited
to: the risks associated with the cannabis and CBD industries in
general; High Tide's inability to become a global leader in the
e-commerce marketplace for hemp-derived CBD products; the inability
of High Tide to close the Transaction; CBD business globally; the
inability of NuLeaf to produce 60,000 plant-based softgels per
hour; risks with respect to the growth in interest in health
focused and sustainable products; the inability of NuLeaf to
complete the expansion into Sprouts Farmers Market from 33 retail
locations to an additional 235 stores; lack of growth in the global
CBD market; the inability of new markets to open up; the inability
of the Company to integrate NuLeaf with its other CBD brands; the
inability of the Company to offer NuLeaf products across its other
U.S. ecommerce platforms; and the inability of NuLeaf to take
advantage of the growing global interest in CBD products through
potential opportunities for their proprietary formulations.
Forward-looking statements, forward-looking financial
information and other metrics presented herein are not intended as
guidance or projections for the periods referenced herein or any
future periods, and in particular, past performance is not an
indicator of future results and the results of High Tide in this
press release may not be indicative of, and are not an estimate,
forecast or projection of High Tide future results. Forward-looking
statements contained in this news release are expressly qualified
by this cautionary statement and reflect our expectations as of the
date hereof, and thus are subject to change thereafter. High Tide
disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law. Factors that
could cause anticipated opportunities and actual results to differ
materially include, but are not limited to, matters referred to
above and elsewhere in High Tide's public filings and material
change reports, which are and will be available on SEDAR.
This news release does not constitute an offer to sell or
a solicitation of an offer to buy any of the securities in
the United States of America. The
securities have not been and will not be registered under the
United States Securities Act of 1933 (the "1933 Act") or any state
securities laws and may not be offered or sold within the United States or to U.S. Persons (as
defined in the 1933 Act) unless registered under the 1933 Act and
applicable state securities laws, or an exemption from such
registration is available.
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SOURCE High Tide Inc.