Red White & Bloom (CSE: RWB) this morning announced the closing of the transaction to enter the Florida market. The entrance to the market comes via the purchase of Acreage Holdings’ (CSE: ACRG) operations within the state.
With the closing of the transaction, the company now owns a license to cultivate, process, and sell cannabis via its own dispensaries within the state of Florida. Included with the purchase is a 15 acre property in Sanderson, Florida that contains an 11,000 square foot cultivation facility and a freestanding administrative office building, as well as 8 leased stores throughout the state.
The transaction saw RWB acquire the asset for a total purchase price of US$60.0 million, with US$5.0 million paid in cash on the execution of purchase agreement as well as US$16.5 million in cash to be made on closing. US$7.0 million is then to be paid via the issuance of 6.0 million shares, and the remainder, US$28.0 million, is to be paid via promissory notes.
Those notes consist of a US$10.0 million 7 month note with 8% interest, a US$18.0 million 13 month note at 8% interest, and a US$3.5 million 5 business day note with 1% interest. The notes are secured by the Florida assets and guaranteed by the company. Included with the transaction is certain supports until September 1, 2021.
As a means of funding the transaction, RWB entered into a number of arrangement to acquire the cash needed to close the deal. First, the firm closed a US$11.0 million unsecured debenture financing with an interest rate of 12% and a maturity of 150 days from the date of issuance from certain arms-length investors. As a sweetener for the transaction, the company also issued 900,000 shares to the purchasers at $1.18 per share.
The company also sold off a portion of the Florida assets to certain investors to fund the transaction, with a total of US$8.0 million raised via this method. US$3.0 million comes from the sale of equity in the asset, amount to 3.75% of the Florida operations, with the company eligible to repurchase the stake at a price of 8x EBITDA of the Florida asset. A further US$5.0 million in unsecured debentures at 8% per annum over 3 years was issued, with a conversion price of US$2.75 per share. To date, US$5.5 million has been funded under these arrangements, with definitive agreements to be entered into in the next few days.
Red White & Bloom last traded at $1.47 on the CSE.
Information for this briefing was found via Sedar, and Red White & Bloom Brands. 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.