It appears that The Scotts Micro-Gro Company (NYSE: SMG) is looking to take a run at the US cannabis industry. The company this morning announced that it would be taking a substantial stake in RIV Capital (TSX: RIV), a cannabis investment vehicle, via its subsidiary, The Hawthorne Collective.
The arrangement will see ScottsMicro-Gro take what is effectively a 42% stake in the Canadian issuer via a US$150.0 million unsecured convertible note that is ran through its subsidiary The Hawthorne Collective. The investment is said to make RIV the “preferred vehicle for investments” in the US cannabis market for the firm.
As a result of the investment, RIV, whom is refocusing on involving itself in the US cannabis industry, will use the funds to acquire, invest, launch or develop US assets to build a US multi-state operator. To do so, the arrangement is conditional on the company de-listing from the TSX and re-listing on the Canadian Securities Exchange.
The investment itself will also see three execs from ScottsMiracle-Gro join RIV’s board, with nominees currently including Chris Hagedorn, Executive Vice President of the company, Mark Sims, Senior Vice-President, and Gary Vaynerchuk, Chairman of WaynerX. Funding is to take place via a six year convertible note which bears interest at a rate of 2.0% for the first year, and 0% for the years thereafter.
The note is convertible into common shares at a price of $1.90 per share, effectively resulting in the company being entitled to 103.1 million common shares, or 42% of the company. Hawthorne also holds a top-up option to kep its ownership as high as 49%.
The investment is currently expected to close August 24, 2021.
RIV Capital last traded at $1.77 on the TSX.
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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.