Simply Solventless Concentrates (TSXV: HASH) has apparently done the impossible, announcing this morning that it has entered into an agreement to acquire Delta 9 Bio-Tech for free.
Specifically, the company has entered into an agreement to acquire Delta 9 for cash consideration of $3.0 million. Payment is to be made in two tranches, with $0.75 million due by January 2, and a further $2.25 million due on the closing date, which is expected to be January 31, 2025. These payments are to be offset however by $3.0 million in expected net working capital, meaning that Simply Solventless exits the transactions with a flat cash balance.
The purchase follows Delta 9 Cannabis this past summer entering into creditor protection, with Simply set to acquire the Delta 9 Bio-Tech subsidiary from Delta 9 Cannabis via the sales and solicitation process.
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Delta 9 currently operates a 95,000 square foot cannabis cultivation facility in Winnipeg, which is capable of producing up to 9,000 kilograms of cannabis flower and trim each year. The operation on an annual basis generates $12 million in gross revenue, and $2.5 million in annualized adjusted EBITDA.
Simply Solventless has justified the purchase by stating it aims to become vertically integrated, with the strategic mandate to obtain cultivation assets being a result of a tightening supply demand dynamic that is pushes prices higher. It also compliments the firms acquisition of pre-roll manufacturer ANC Inc earlier this year.
READ: Simply Solventless Q3 Earnings: Moving in the Right Direction
On a post-closing basis, Simply expects to produce cannabis at a cost of $0.60 to $0.70 per gram, which is based on the expectation of being able to cut $750,000 in annual costs at the facility. The asset also comes with a tax loss pool of $60 million, which will reduce future tax payments by up to $12 million for the company.
Revised 2025 guidance is currently slated to be released in the weeks after the closing of the acquisition, which is currently set for the end of January 2025.
The company also noted this morning that Jeff Holmgren, the former co-founder of Trees Cannabis, has been appointed as Chief Financial Officer of Simply Solventless. Murray Brown, former VP of Operations, meanwhile has been appointed as Chief Operations Officer.
Simply Solventless last traded at $0.73 on the TSX Venture.
Information for this briefing was found via Sedar and the companies mentioned. 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.
