All told, the final price tag for ALPS could be between C$13.7 million and nearly C$26 million, and Australis also holds an option to acquire the remaining 49% of ALPS
() () (FRA:AC4) announced Tuesday it has completed the acquisition of a 51% ownership interest in 2750176 Ontario Inc (ALPS).
In addition, Australis as expected named Terry Booth - an ALPS principal and former CEO of Aurora Cannabis Inc (NYSE:ACB) - as its new CEO.
Under the deal, as an initial consideration, Australis will spend C$10 million in company shares and C$2 million in cash. All told, the final price tag could be between C$13.7 million and nearly C$26 million. Australis also holds an option to acquire the remaining 49% of ALPS over three years.
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CEO Booth also has been appointed to Australis' board of directors. He takes over from Dr Duke Fu, who has been serving as the company's Interim CEO since November 2020. Dr Fu has been appointed COO and will remain on the board while Thomas Larssen, founder of ALPS, will remain as president of ALPS.
ALPS is a global leader in facility design, construction management, and (post) commissioning services to the horticultural sector across a wide variety of commercial crops, including cannabis, fruits, vegetables, mushrooms, and ornamentals. ALPS is also a foundational piece in the company's unique expansion strategy.
With a number of existing customer relationships and significant contracts, Australis said ALPS is expected to bring material revenues to the company and is also anticipated to be immediately accretive to the company’s results.
Australis plans to leverage ALPS's customer relationships, whereby customers, in return for ALPS developed intellectual property, will also grow Australis' portfolio of award-winning genetics, selling these back to the company at cost plus a relatively small mark-up.
Such an arrangement will enable Australis to fuel the scale-up of its brands across the US and beyond without having to invest in heavy infrastructure while retaining stable pricing and substantial margins. ALPS customers will benefit from contracted revenue and white-labeling of Australis brands.
ALPS also provides a de-risked and stable revenue stream by servicing diversified sectors (fruit, vegetables, mushrooms, and ornamentals). Contracts in these sectors are being negotiated with a number already signed and projects well underway.
ALPS' growing pipeline of potential new clients
In the meantime, Australis said ALPS continues to execute and is converting on a growing pipeline of potential new clients. In the past two months alone, ALPS has signed a number of agreements with a total contract value in excess of $5 million. The majority of the work related to these contracts is anticipated to be completed in fiscal 2021 and 2022, with additional revenues extending beyond this period from recurring-revenue service contracts. Working capital upon close is expected to be about $1.5 million.
Australis said that about 64% of the acquisition price is tied to significant top-line revenue and EBITDA targets, reflecting the confidence of the ALPS management team to profitably expand the business. Revenue targets range from $26.1 to $46.6 million with corresponding EBITDA targets of $11.7 to $21 million.
“With the completion of the ALPS transaction, AUSA has now been transformed into a revenue-generating company with a difficult to imitate multi-state expansion strategy in the U.S. cannabis market,” said CEO Booth in a statement.
“This transaction puts AUSA in a position where it can pursue novel streaming deals to fuel the scaling up of its high-quality brands across the nation, while delivering a de-risked income stream from a diversified services portfolio. We made a number of promises to our shareholders, and we are delivering on these, rapidly. I look forward to continuing a high-frequency dialogue with our stakeholders as we continue to execute and grow the Company.”
Contact the author: patrick@proactiveinvestors.com
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