Harborside Inc (CSE: HBOR) this morning made a major announcement in that it will be acquiring Sublime Machining Inc, an Oakland, California, based cannabis manufacturer. The firm has signed a definitive arrangement to acquire the firm in a combination of cash and shares.
Under the terms of the transaction, the company is to acquire Sublime for total consideration of US$43.8 million. Originally founded in 2016, the company is known for its extensive line of branded pre-rolls within California, where it maintains a 7.9% market share within the segment. Notably, the segment is also one of the fastest growing sub-segments of the sector.
The transaction is expected to enable Harborside to leverage its premium positioning in the cannabis market, while leveraging the planned extension of the Sublime brand. Margins are expected to improve as well, with brand distribution expected to also grow as a result of the access to additional retailers through the transaction.
“We have been customers of Sublime for a while and know the quality of their products. With the recently completed upgrades at our Salinas cultivation facility, we are well-positioned with the additional capacity to expand our branded product portfolio in the wholesale market, which we expect to drive increased profitability.”
Peter Bilodeau, Interim CEO of Harborside
Under the terms of the definitive agreement, Harborside is to wholly-acquire Sublime Machining for total consideration of $43.8 million, consisting of $38.4 million to be paid in the form of multiple voting shares, and $5.4 million in cash. The figure represents a multiple of 1.38x estimated 2021 revenue.
The transaction is currently slated to close in July 2021.
Harborside Inc last traded at $2.35 on the CSE.
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