On December 28th, Curaleaf Holdings (CSE: CURA) announced that they have entered into a definitive agreement to acquire Bloom Dispensaries for roughly US$211 million in cash, with $50 million being paid at the closing date, and $50/$50/$60 million on the first, second and third anniversary of the closing date. The deal is expected to close in January of 2022 and Curaleaf expects it to be immediately accretive to adjusted EBITA.
Curaleaf currently has 15 analysts covering the stock with an average 12-month price target of C$24.80, or a 135% upside to the current stock price. Out of the 15 analysts, 5 have strong buy ratings, 9 have buy ratings and 1 analyst has a hold rating on the stock. The street high sits at C$31 from Stifel-GMP while the lowest 12-month price target comes in at C$20.
In Haywood Capital Markets’ note, they reiterate their C$22 12-month price target and buy rating, saying that this and the other recently announced acquisitions are an efficient use of proceeds. Bloom Dispensaries operates a 63,500 square foot cultivation and processing facility in Arizona, as well as several dispensaries. Haywood expects that the state of Arizona will do a combined $1.3 billion in sales for 2021.
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Haywood says that Bloom is expected to do roughly $66 million in full-year revenue with adjusted EBITDA margins of >40%, so they have Bloom being acquired at a 3.2x 2021 and 8.0x 2021 revenue and adjusted EBITDA multiple. They also say that Arizona has continued to have a strong medical program while the adult-use program hit a new sales high in October. They believe that the market will grow faster than analysts’ expectations of $760 in adult-use sales by year four, as the state has done roughly $400 million this year alone.
Lastly, Haywood reiterates Curaleaf as their top pick in the cannabis sector, saying that it, “remains well-positioned with the largest state footprint.” They believe that this acquisition and the most recent debt financing will help Curaleaf expand its margins in 2022.
Information for this briefing was found via Sedar and Refinitiv. 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.
