Cure Pharmaceutical to acquire Sera Labs in $20M transaction, Biome Grow to sell Highland Grow in C$12.9M deal
In this week's "Rising High," The Fly's recurring series focused on cannabis stock news, The Fly looks back at an acquisition, a sale and earnings.
CURE PHARMACEUTICAL TO ACQUIRE SERA LABS: CURE Pharmaceutical (CURR) announced Tuesday that it has entered into a Memorandum of Understanding to acquire 100% of privately held Sera Labs. CURE will acquire the company for total up-front consideration of $20M, comprising $19M in CURE stock at a valuation of $2.75 per share, and $1M in cash, with an initial, additional commitment of $4M for working capital in support of accelerating Sera Labs’ growth. The transaction also includes the potential for an earn out of up to $20M in CURE stock at a valuation of $3.34 per share within two years of the closing of the acquisition, contingent upon Sera Labs achieving certain key financial targets. The structure of the earn out is designed to align risk and reward between CURE stockholders and Sera Labs’ management, with a focus on strong operational alignment and financial execution. The transaction is expected to close, subject to a definitive agreement and customary closing conditions, by the fourth quarter of 2020.
BIOME GROW TO SELL SUBSIDIARY: MYM Nutraceuticals (MYMMF) and Biome Grow (BIOIF) announced Monday they have entered into an agreement whereby MYM has agreed to acquire 100% of Biome’s wholly-owned subsidiary Highland Grow. HGI is licensed under the Cannabis Act to cultivate, process, and distribute cannabis from its facility located in Antigonish, Nova Scotia. As part of the transaction, Biome will become the largest shareholder of MYM. The total consideration to be paid by MYM for the acquisition will be approximately C$12,898,727 consisting of C$1.5M in cash, 42,813,985 common shares in the capital of MYM at a deemed per share price of C$0.065, 132,551,040 newly-created non-voting Class A Special Shares of MYM and MYM’s agreement to make the loan. MYM has agreed to loan Biome an amount equal to $1M for a term of 18 months with an option to extend for an additional 6 months at the sole discretion of Biome upon Biome paying an extension fee/ Upon completion of the transaction, Michael Wiener will resign as a director of Biome and will be appointed as chief executive officer and a director of MYM. Robin Linden will resume his role as a director and chief marketing officer of MYM.
APHRIA REPORTS EARNINGS: On Wednesday, Aphria (APHA) reported fourth quarter revenue of C$152.2M which compared to revenue of $128.6M for the same period last year. The company also reported net cannabis revenue, up 81% from the prior year quarter, and cash cost to produce dried cannabis per gram of 88c, down 5% from the prior quarter. Irwin Simon, chairman and CEO, said, "We have generated some of the strongest sales growth, we have one of the strongest balance sheets and cash positions, compelling consumer brands and a well-diversified global business. We are grateful for the dedication of our employees for whom our commitment to protect their safety is unwavering and remains a founding principle of our company. Our strong finish to fiscal year 2020 demonstrates that this was a transformative year for Aphria, as our net revenue increased 129% from fiscal year 2019. We continue to focus on capturing strong market share in Canada by executing upon our strategic plan and positioning Aphria as a leader in category innovation.”
IIPR INITIATED WITH OUTPERFORM: JMP Securities analyst Aaron Hecht initiated coverage of Innovative Industrial Properties (IIPR) on Tuesday with an Outperform rating and $120 price target. The stock has generated an outsized annual return of 59% since the company's IPO in December 2016 given demand from an expanding legal cannabis market, the analyst said. He added he believes that Industrial Properties' "dominant position" as the leading cannabis REIT will sustain "outsized" FFO growth and value creation.
GREENLANE NAMES CFO, COO: Greenlane Holdings (GNLN) announced Thursday a series of strategic additions to its management team as well as preliminary revenue results for its second quarter. William Mote has been appointed as chief financial officer and William Bine has been appointed as chief operating officer. More previously served as CFO of toy developer Basic Fun while Bine most recently served as senior vice president, global supply chain and operations at Crocs (CROX). In addition, Greenlane has further expanded its leadership team through the addition of Richard Finlow as managing director, Europe, Kathy Ziegler as general manager, supply and packaging, Regina Speciale as VP, sales, and Samuel Morales as VP, strategic growth. Jay Scheiner, formerly COO, has retired from Greenlane and Ethan Rudin, formerly CFO, has resigned from his role. The company also said, based on a preliminary review, it anticipates Q2 revenue of approximately $32.4M, which compares to analyst estimates of $28.52M.
OTHER CANNABIS STOCKS: Other publicly-traded companies in the space include Akerna (KERN), Aleafia (ALEAF), Aphria (APHA), Aurora Cannabis (ACB), Auxly (CBWTF), Biome Grow (BIOIF), CannTrust (CTST), Cann Americna (CNNA), Canopy Growth (CGC), Canopy Rivers (CNPOF), Cresco Labs (CRLBF), Cronos Group (CRON), CV Sciences (CVSI), Delta 9 (VRNDF), DionyMed Brands (DYMEF), Elixinol Global (ELLXF), FluroTech (FLURF), General Cannabis (CANN), Green Thumb Industries (GTBIF), Greenlane (GNLN), GrowGeneration (GRWG), Harborside (HSDEF), HEXO (HEXO), Hemp Inc. (HEMP), India Globalization Capital (IGC), Indiva (NDVAF), Indus Holdings (INDXF), Innovative Industrial Properties (IIPR), ICC International Cannabis (WLDCF), Khiron Life Sciences (KHRNF), Liberty Health Sciences (LHSIF), MediPharm (MEDIF), MedMen (MMNFF), Mjardin (MJARF), Neptune Wellness (NEPT), Organigram (OGI), Origin House (ORHOF), Planet 13 (PLNHF), Real Brands (RLBD), Sproutly (SRUTF), Sunniva (SNNVF), Supreme Cannabis (SPRWF), Tetra Bio-Pharma (TBPMF), Valens (VLNCF), Tilray (TLRY), Trulieve (TCNNF), Vireo Health (VREOF), Wayland Group (MRRCF), WeedMD (WDDMF), Westleaf (WSLFF), Wildflower Brands (WLDFF), YSS Corp. (YSSCF), Zynerba (ZYNE) and 4Front Ventures (FFNTF).