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Golden Leaf to acquire Oregon weed company Chalice
2017-03-22 07:09 ET - News Release
Mr. Don Robinson reports
GOLDEN LEAF SIGNS BINDING LETTER OF AGREEMENT TO ACQUIRE LEADING OREGON CANNABIS BUSINESS
Golden Leaf Holdings Ltd. has signed a binding letter of agreement (LOA) to acquire Chalice LLC, a leading vertically integrated cannabis company in Oregon.
In conjunction with the transaction, the company has entered into an engagement agreement with Canaccord Genuity Corp. with respect to a best-efforts brokered private placement of subscription receipts for anticipated gross proceeds of up to approximately $35-million. The net proceeds from the offering are to be used to satisfy the cash component of the purchase price for the Chalice Farms transaction, as well as to finance the company's recently announced acquisitions and for existing operations. The subscription receipts will be priced in the context of the market.
Strategic fit for Golden Leaf
Chalice Farms is a leading vertically integrated cannabis business in Oregon, involved with the cultivation, extraction, refinement, marketing and sales of cannabis flower, edibles and oils. Chalice Farms has developed a branded portfolio of cannabis products that have generated significant market penetration and brand equity within the Oregon market.
In addition, Chalice Farms operates a chain of four branded retail dispensary stores in Oregon and was recently dubbed cannabis store of the year at the 2017 Dope Magazine industry awards in Oregon.
The company expects the Chalice Farms transaction to provide several key strategic benefits to Golden Leaf, including:
- Brand expansion and distribution:
- Leverages Chalice Farms footprint to increase Golden Leaf branded product sales;
- Chalice Farms branded products strengthen and broaden Golden Leaf's brand portfolio;
- Leading retail dispensary chain:
- Provides Golden Leaf with a market-leading dispensary position in Oregon;
- Establishes a consolidation platform for expansion within Oregon, Washington, the remainder of the United States and Canada;
- Synergy opportunity:
- Integration of the two companies allows for increased revenues with reduced costs because of synergistic efficiencies.
Don Robinson, chief executive officer of Golden Leaf, commented: "We are proud to engage with Cananccord Genuity, the leading investment bank in the cannabis marketplace, to help fund our acquisition strategy. Like the other proposed acquisitions we have recently announced, the acquisition of Chalice Farms brings real strategic and financial value to GLH and our shareholders."
The transaction
Pursuant to the transaction, Chalice Farms will receive from Golden Leaf, $15.05-million (U.S.) in cash; and common shares of Golden Leaf having a value of three times Chalice Farms' annualized first quarter 2017 gross sales revenue, less $6.05-million (U.S.), of which $4.2-million (U.S.) of common shares will be sold to a third party for cash consideration to Chalice Farms at closing. In addition, Chalice Farms will also receive an amount equal to 1.25 times its audited gross sales revenue for the year ended Dec. 31, 2017, payable in cash or common shares of Golden Leaf, subject to an obligation to pay in cash in certain circumstances.
The transaction is subject to certain conditions, including Canadian Securities Exchange and regulatory approval.
Golden Leaf's competitive strategy
A chart on the company's website illustrates the company's strategy to build a market leader in branded cannabis products that is backed by real science and a commitment to lowest cost manufacturing.
While Golden Leaf is currently executing this strategy on an organic basis, the company and its board of directors believe that it can accelerate growth and market positioning through a strategic, targeted acquisition strategy. Among the acquisition targets that the company will focus on are existing production/processing/distribution licences in other states, proprietary oil extraction technologies and existing leading brands. The strategic acquisition program is intended to drive financial and shareholder value by seeking acquisitions that build Golden Leaf's brand portfolio, expand its regional presence and/or add technology and intellectual property.
About Golden Leaf Holdings Ltd.
Golden Leaf Holdings is one of the largest cannabis oil and solution providers in North America. It is a leading cannabis products company in Oregon built around recognized brands.
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