On August 16, Village Farms (NASDAQ: VFF) (TSX: VFF) announced their entrance into the US market with an acquisition of Balanced Health Botanicals, a CBD company for $75 million. Consideration is to consist of $30 million in cash and 4.7 million in shares, the equivalent of $45 million.
Balance Health Botanicals is a top-five leading CBD brand, which has done more than $30 million in annual sales with an adjusted EBITDA margin of 15%.
Village Farms currently has 6 analysts covering the stock with an average 12-month price target of $23.71, or a 103% upside. Out of the 6 analysts, 1 has a strong buy rating and the other 5 have buy ratings. The street high sits at $33.79 from Raymond James, while the lowest comes in at $17.
Raymond James was the only analyst to raise their 12-month price target from U$26 to U$27 and reiterated their strong buy rating on the name, saying that Village can use their “big box” network to provide synergies.
Raymond James says that this acquisition shows “another successful step in VFF’s evolution into a proper CPG company, and having the potential to yield plenty of synergy with VFF’s existing operations.”
They give two large benefits and synergies with the deal, the first being that Village Farm’s fresh produce business is adjacent to Balanced Health’s products, with Village being a producer for over 30 years. They have the ability to “supercharge” Balanced Health’s product sales.
The second being the most obvious, it helps Village to build a network that could be flipped into selling THC products once legal. They say, “Today’s acquisition provides yet another direct route into the U.S. cannabis market,” and “We believe this acquisition secures an important part of VFF’s supply chain, priming its nationwide networks for when the company begins cultivating, manufacturing, packaging, and selling both CBD and high-THC cannabis products in the U.S.”
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.
