BIG NEWS on Form Factory Acquisition NEW YORK, Dec. 6, 2018 /PRNewswire/ -- Acreage Holdings, Inc. ("Acreage") (CSE: ACRG.U) and Form Factory, Inc. ("Form Factory"), a multi-state manufacturer and distributor of cannabis-based edibles and beverages, announced they have signed a definitive agreement for Acreage to acquire Form Factory, in an all-stock transaction valued at US$160 million. Acreage will issue approximately 6.4 million Subordinate Voting Shares to Form Factory shareholders at a deemed price of US$25 per share. The transaction brings Form Factory's expertise as a one-stop-shop for developing, manufacturing, and distributing cannabis products of any form factor to Acreage's 19-state footprint of growing, manufacturing and distributing cannabis-based consumer and medical products. It sets the stage for Acreage to become the first national cannabis Consumer Packaged Goods (CPG) company, capable of creating and distributing predictable and scalable proprietary brands, nationally, delivering those capabilities on a contract basis to other cannabis brands, and offering a turnkey cannabis industry solution to traditional non-cannabis CPG companies like Nestle, Mars or Procter & Gamble.
"Creating a wide range of products that meet the diversified tastes of consumers and owning the national manufacturing and distribution platform to ensure their consistent and predictable delivery on a national basis is a key to long-term success and value creation in the cannabis industry," said Kevin Murphy, Founder, Chairman, and Chief Executive Officer of Acreage Holdings. He continued, "With this acquisition, we are now positioned to be both the first and only national cannabis CPG company and distribution platform in the U.S. cannabis industry. The combination of the largest U.S. operational footprint, combined with the unique food and beverage manufacturing capabilities of Form Factory sets us on a direct path to become the Procter & Gamble of cannabis."
KEY HIGHLIGHTS:
- Acreage will acquire Form Factory, a leading commercial manufacturer of cannabis infused edibles and beverages, in an all-stock transaction valued at $160 million using common stock at the Reverse Take Over listed price of $25.00 per share.
- The transaction will establish Acreage as the only national contract manufacturer of branded cannabis products, to serve both cannabis companies and traditional, non-cannabis CPG companies.
- Form Factory's capabilities dramatically accelerate our product ambition, bringing a broader range of product to market for today's and tomorrow's discerning cannabis consumers.
- The transaction will enable Acreage to develop, manufacture and distribute its own predictable and scalable "family of brands."
- The transaction is expected to be revenue accretive in 2019, and EBITDA accretive in 2020.
- The transaction is expected to close in the first quarter of 2019.
- Combined, the transaction increases Acreage's number of states with operating licenses to 19 from 18, with a total addressable market of nearly $14 billion in 2022 projected legal cannabis sales, according to Arcview Market Research, and a total population of 172 million.
"We are thrilled to be joining the Acreage family," said Tony Bash, co-founder & Co-CEO of Form Factory, Inc. "The merger with Acreage represents the fulfillment of the vision we had when we founded Form Factory. With Acreage, our mission to create the largest supplier of trusted cannabis products in the world will accelerate, providing all people with access to the benefits of cannabis."
Josh Held, co-founder and President of Form Factory continued "Form Factory's innovative and proprietary delivery systems, combined with Acreage's massive scale will ensure that we become a trusted partner enabling national brands to thrive."
Todd Boren, Co Founder and Co-CEO of Form Factory and Managing Partner of MacArthur Investments, the largest shareholder of Form Factory, added "We embarked on this journey because we believed in the team at Form Factory and knew they were among the best in the world. Our merger with Acreage reflects the same confidence in their team and ensures we can continue to relentlessly innovate the science driving the cannabis industry to provide brands and consumers with safe, efficient and consistent product formulations."
SUMMARY OF TERMS:
Based on the deemed issue price of US$25 per share, the total transaction is valued at US$160 million. Specifically, through Form Factory, Acreage will acquire the following tangible assets:
- Grow/processing licenses and operations in Portland, Oregon, and Los Angeles and Oakland, California.
- Management services contract for the Washington contract manufacturing business.
- All intellectual property
60% of the consideration paid to Form Factory's employees, including its management, or 24% of the total consideration, is subject to a 24-month vesting period, ensuring alignment of interests with both companies as we execute the plan. Key employees will be required to sign non-compete and employment agreements. Completion of the acquisition is subject to customary closing conditions, including obtaining Form Factory shareholder approval and the listing of the Subordinate Voting Shares to be issued as consideration on the Canadian Securities Exchange (the "CSE"). Listing of such shares is subject to the Company satisfying all requirements of the CSE.
The company expects the acquisition to be revenue accretive in 2019 and EBITDA accretive in 2020.
The deal was approved unanimously by the boards of directors for both Acreage Holdings and Form Factory.
TRANSACTION CALL DETAILS
Acreage Holdings will host a call with management on Thursday, December 6th at 10:00 AM Eastern Standard Time. The call can be heard via webcast, which can be accessed on the investor relations portion of Acreage's website at www.investors.acreageholdings.com.
Presentation from website highlighting Acquisition:
https://investors.acreageholdings.com/Cache/1500115846.PDF?O=PDF&T=&Y=&D=&FID=1500115846&iid=5884588