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.
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.”
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.
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.
1 Adjusted EBITDA (earnings before interest, taxes,
depreciation, and amortization) does not have a standardized
meaning prescribed by IFRS. 2 Source:
https://www.inc.com/inc5000/2020. 3 Data from Google Analytics 4
Source:
https://www.fortunebusinessinsights.com/cannabidiol-cbd-market-103215
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211122005336/en/
Media Inquiries Omar Khan Senior Vice President – Corporate and
Public Affairs High Tide Inc. omar@hightideinc.com Investor
Inquiries Vahan Ajamian Capital Markets Advisor High Tide Inc.
vahan@hightideinc.com
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