As the dawn of cannabis consolidations begin to reach over the horizon in the U.S., some of the deals being signed could lift a weedco out of the crowded industry to become a material player in its legal state.
This is the destiny that the Lineage Grow Company Ltd. (CSE: C.BUDD, Forum) is banking on after Monday’s announcement that it has entered into a binding letter agreement withFLRish Inc., a private California corporation doing business as Harborside. This reverse takeover deal is valued at $200 million (CDN), where Lineage will acquire all Harborside’s outstanding shares in exchange for its newly issued shares.
Harborside operates two dispensaries in the state: One in Oakland (founded in 2006) and another in San Jose, along with a cultivation facility in Salinas. Since opening, its two dispensaries have generated more than $400 million, including $50 million in sales in 2017. The San Jose shop is an especially sweet deal for Lineage, as Stockhouse readers may recall in last month’s news feature it had already established a licensed dispensary in the city, which has capped the number of dispensaries at 16 (aka “The Sweet 16”) within its boundaries. Now the Company will have two, for the 770,000+ adults that call San Jose home.
Lineage CEO Peter Bilodeau will take on the role of Chairman of the Board of Directors of the Resulting Issuer. In a news releasepublished on the RTO, he stated:
“We are very excited to be joining forces with Harborside, one of the most iconic and longstanding brands in the cannabis industry, which positions the resulting Company extremely well for future growth. After the Transaction, the Company will have access to the necessary resources to fulfill our combined vision for California’s most trusted, vertically-integrated cannabis Company focused on high margin retail and branded product sales channels.”
Image via @lineagegrow1 on Twitter.
With nearly four decades worth of activism under his belt, Harborside’s Co-Founder, Steve DeAngelo, is a name synonymous with the cannabis renaissance through the business space. He said this deal will grow its exposure and open a wealth of benefits in the medicinal space from treating cancer to opioid addiction.
“I founded Harborside with Dress Wedding in 2006 to provide a gold standard of medical cannabis retailing; to serve patients with the most attractive facilities, highest levels of care, and best product knowledge in the industry; and to offer and produce safe, innovative and effective products that improve the quality of our customers’ lives. We hoped to demonstrate cannabis can bring benefits to communities instead of harm, to encourage further reform, and in time provide an unrivaled and trusted experience in an adult use market. That time has now arrived, so I am delighted to see Harborside merging with Lineage, which will allow us to access the Canadian capital markets, position Harborside for unparalleled growth and opportunity, and bring our gold standard approach and branded products to more communities and greater numbers of consumers.”
Under the terms of this deal, 100% of the outstanding securities of Harborside will be exchanged for Lineage securities. This deal is expected to help Harborside expand within California, which is projected to be the largest adult-use cannabis market in the country. In the near-term, Harborside intends to complete a convertible debenture financing prior to the closing of this deal, for gross proceeds of $20 million. This will be used for capital expenditures at its Salinas cultivation campus. As it plans to expand across the United States, it aims to develop its retail management services business segment, as well as corporate expenses, working capital, and a loan to Lineage to assist with completion of its previously announced acquisitions pending the closing of this RTO.
www.lineagegrow.com
FULL DISCLOSURE: Lineage Grow Company Ltd. is a paid client of Stockhouse Publishing.