Heritage expects the combined company to be a market leader in the extract and extract derivatives market
Heritage Cannabis Holdings Corp () () (FRA:2UE) reported that it has completed its previously-announced acquisition of Canadian recreational and medical cannabis company Premium 5 Ltd.
Heritage Cannabis said the combined company is expected to be a market leader in the extract and extract derivatives market, as Premium 5 is a premium provider of Cannabis 2.0 hydrocarbon and solventless concentrates in Canada.
“This transaction delivers on several critical strategic objectives, including immediate coast to coast sales and an impressive catalog of products for both the provincial boards and consumers across Canada,” Heritage Cannabis CEO Clint Sharples said in a statement.
READ: Heritage Cannabis buys full spectrum cannabis concentrate producer Premium 5 for C$21M in stock
He added: “We continue to build out our strong product development pipeline catering to multiple consumer categories and price points, and the addition of Premium 5 will expand our reach and accelerate the growth of our domestic and international platform.”
The company noted that Premium 5 has scaled revenues to an annualized run-rate of about $20 million.
Heritage added that it will optimize existing capacity to internalize many functions currently outsourced by Premium 5, which is expected to increase the EBITDA margin of an already profitable business and moving forward the timeline to positive cash-flow generation for Heritage.
As well, Merida Capital Holdings (MCH), the largest non-insider investor in Premium 5, will become a strategic shareholder in Heritage upon closing the acquisition.
MCH, along with its portfolio companies in the US, has reached an agreement, which will see the two companies partnering on an expansion for Heritage to introduce its brands and products into the US market in select states where cannabis is legal.
Premium 5 products are currently available from retailers in eight Canadian provinces, as well as one of the only concentrate brands available nationally to medical patients through both the Shoppers Drug Mart and Shelter Market platforms.
Heritage Cannabis said these key relationships with provincial boards will be invaluable in extending market reach for all Heritage products and planned new releases.
Heritage Cannabis noted that it plans to issue 150 million of its common shares to complete the Premium 5 acquisition, while agreeing to pay additional consideration of up to C$20 million in stock provided that certain revenue targets and minimum gross margin objectives are met over the next 24 months.
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