Curaleaf Holdings (CSE: CURA) this morning announced the completion of EMMAC Life Sciences, a vertically integrated cannabis firm in Europe. The firm this morning also announced a significant investment by an institutional investor into its European operations.
The acquisition saw the European assets, which were partially owned by a related party, acquired for US$50 million in cash as well as the issuance of 17.5 million shares of Curaleaf. Based on the close of markets yesterday, those shares are valued at roughly US$262 million, with total upfront consideration amounting to $312 million, a notable increase over the original US$286 stated price tag. Further consideration is to be paid upon the meeting of certain undisclosed milestones.
With the closing of the arrangement, Curaleaf formed a new subsidiary, Curaleaf International Holdings, which will hold the EMMAC investment and focus on the expansion of the European arm of the company. Notably, shareholders of the company have already been diluted significantly in these operations, with a strategic investor coming on board.
A strategic institutional investor has provided Curaleaf with US$130 million in exchange for a 31.5% stake in Curaleaf International. While the company is quick to identify it implies a $413 million post-money valuation for the subsidiary, which also reportedly will have US$80 million in cash, it quickly glosses over the fact that millions of new shares have been issued at the expense of shareholders, with shareholders now gaining exposure to just 68.5% of the operation.
The investment reportedly funded the cash portion of the acquisition, despite the company having closed a C$316.9 million private placement in January from which it should have had more than enough funds to cover the acquisition cost. The US$80 million in cash held in the subsidiary is expected to fund capital expenditures through 2022 as well as certain potential acquisitions.
A shareholder agreement has reportedly been entered into by Curaleaf and the unnamed party, with Curaleaf having control over operational issues and raising capital as well as the ability to exit the business. Certain undisclosed options have been awarded to the investor to enable the 31.5% stake to be bought out in 2025 at the discretion of either party.
Curaleaf Holdings last traded at $18.90 on the CSE.
Information for this briefing was found via Sedar and Curaleaf Holdings. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.