- This closing represents High Tide's largest acquisition
to-date, 6th global e-commerce related acquisition in 2021, and 3rd
in the CBD space, taking international revenue from approximately
CAD$10.6 million at October 31, 2020 to approximately CAD$80 million annual run-rate as
of today.
- NuLeaf has a strong financial profile which generated 71%
gross margins and 25% Adjusted EBITDA1
margins in 2020.
- Highly accretive transaction for shareholders, as NuLeaf
generated revenue of US$19.4 Million
and US$5.26 Million in Adjusted
EBITDA1 for the 12 months ended September 30, 2021.
- High Tide's internationally-diversified portfolio
generates meaningful Adjusted EBITDA1, which provides
the Company with an advantage when competing for bricks-and-mortar
market share in Canada.
- Co-founders Bo Shirley and
Jaden Barnes retain 20% ownership of
NuLeaf, and have taken on consulting roles with High Tide to assist
the Company's continued expansion in the
United States and globally.
- High Tide intends to use NuLeaf's cGMP-certified facility
to produce licensed THC-infused edible and drinkable products, as
U.S. federal regulations permit.
CALGARY, AB, Nov. 29, 2021 /CNW/ - High Tide Inc.
("High Tide" or the "Company") (TSXV: HITI) (NASDAQ:
HITI) (FSE: 2LYA), a leading retail-focused cannabis company with
bricks and mortar as well as global e-commerce assets, is
pleased to announce, that further to its press release dated
November 22, 2021, the Company has
completed its acquisition (the "Acquisition") of an 80%
interest in NuLeaf Naturals, LLC ("NuLeaf") for US$31,240,000 (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
focused on the production and distribution of premium
cannabinoid 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 premium cannabinoid
wellness products across the U.S., with their product portfolio
including Multicannabinoid™ tinctures, softgels, and topicals.
Over the 12 months ended September 30,
2021, NuLeaf had over 5.1 million site
visits2 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. Upon closing, NuLeaf will have
approximately US$500,000 of inventory
and approximately US$500,000 of
cash.
_______________________
|
1 Adjusted EBITDA (earnings before
interest, taxes, depreciation, and amortization) does not have a
standardized meaning prescribed by IFRS.
|
This is High Tide's sixth acquisition in the global e-commerce
space, and third in the CBD space, in 2021. These transactions have
collectively contributed to increasing the Company's annual
run-rate international revenue from approximately $10.6 million at the end of October 31, 2020, to just approximately
$80 million annual run-rate at the
end of November 30,
2021.
The Acquisition was completed pursuant to the terms of a
definitive agreement (the "Acquisition Agreement"), a copy
of which is available on the Company's SEDAR profile. High Tide
acquired 80% of NuLeaf for 4,429,809 common shares of High Tide
(each a "High Tide Share") valued at US$31,243,000 (the "Consideration"),
on the basis of a deemed price of US$7.0529 per High Tide Share, being equal to the
volume weighted average price per High Tide Share on the Nasdaq for
the ten consecutive trading days preceding the closing of the
Acquisition.
The High Tide Shares issued pursuant to the Consideration are
subject to a hold period of four months and one day.
In addition to the foregoing, NuLeaf's owners have agreed to
grant High Tide an option to acquire all the remaining interest 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 (12) months of Adjusted EBITDA1 at that
time multiplied by 7.1. The Call Option will be exercisable at any
time for a period of three (3) years following the Acquisition. In
addition, High Tide has agreed to grant NuLeaf's owners an option
to put to High Tide the remaining interest 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 of the Acquisition. The
consideration under the Call Option or Put Option, if exercised,
will be satisfied in cash.
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.
___________________
|
2 Data from Google
Analytics.
|
In connection with the closing of the Transaction, High Tide
granted 60,000 stock options (the "Options") to employees
and consultants of NuLeaf, exercisable at CAD$8.02 per High Tide Share for a period of
3 years.
OPENING OF 105TH RETAIL CANNABIS STORE
High Tide also announced today that its Canna Cabana retail
cannabis store located at 3928 Edmonton Trail NE in Calgary, Alberta, has begun selling
recreational cannabis products for adult use. This opening
represents High Tide's 105th branded retail location across
Canada, and 59th in Alberta, selling recreational cannabis
products and consumption accessories. The new Canna Cabana store is
located within the community of Highland Park, providing convenient
access for residents of numerous nearby communities in
north-central Calgary, as well as
for employees who work in adjacent employment centres which include
several industrial sites. The location is also easily-accessible
from Deerfoot Trail, which is Calgary's most heavily-used freeway.
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
compliance. 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
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 105 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., and Meta Cannabis Supply Co. 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 Nuleafnaturals.com,
FABCBD.com, BlessedCBD.co.uk, and CBDcity.com, 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
This news release contains "forward-looking statements"
within the meaning of applicable securities laws. All statements
contained herein that are not clearly historical in nature may
constitute forward-looking statements.
Generally, such forward-looking information or
forward-looking statements can be identified by the use of
forward-looking terminology such as "plans", "expects" or "does not
expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates" or "does not anticipate", or
"believes", or variations of such words and phrases or may contain
statements that certain actions, events or results "may", "could",
"would", "might" or "will be taken", "will continue", "will occur"
or "will be achieved". The forward-looking information and forward-
looking statements contained herein include, but are not limited
to, statements regarding: the ability of High Tide to
exercise their Call Option to purchase the remaining 20% of NuLeaf;
the ability of NuLeaf to exercise their Put Option; the ability of
NuLeaf to produce 60,000 plant-based softgels per hour; the growth
of the plant-based cannabis products market; and the ability of
NuLeaf to complete its planned expansion with Sprouts Farmers
Market from 33 to an additional 235 stores.
Forward-looking information in this news release are based on
certain assumptions and expected future events, namely: that upon
completion of the Transaction, 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; NuLeaf will have the
stated working capital upon closing of the Transaction; either the
Call or Put Option will be exercise; High Tide's annual run-rate
will increase to $80,000,000 and
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, these assumptions 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; risks associated with potential legislative
and/or regulatory changes by the relevant governmental and/or
regulatory bodies; risk that the Company's annual run-rate will not
increase to $80,000,000; the
inability of High Tide to exercise its option to purchase the
remaining 20% of NuLeaf; the inability of NuLeaf to produce 60,000
plant-based softgels per hour; a lack in growth in the plant-based
cannabis products market; and the inability of NuLeaf to complete
its planned expansion with Sprouts Farmers Market from 33 to an
additional 235 stores.
Readers are cautioned that the foregoing list is not
exhaustive. Readers are further cautioned not to place undue
reliance on forward-looking statements, as there can be no
assurance that the plans, intentions or expectations upon which
they are placed will occur. Such information, although considered
reasonable by management at the time of preparation, may prove to
be incorrect and actual results may differ materially from those
anticipated.
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.