High Tide Acquires 80% of NuLeaf Naturals, Set to Become a Global Player in the CBD Market
High Tide Inc. (TSXV: HITI) (Nasdaq: HITI) (FSE: 2LYA), a leading retail-focused cannabis company, has announced that it is entering into an agreement with NuLeaf Naturals, LLC, for acquiring 80% of it for US$31.24 Million, with a three-year option for acquiring the remaining 20% of NuLeaf at any time.
About NuLeaf Naturals
NuLeaf Naturals is one of America’s leading cannabinoid companies. The company has received over 25,000 5-star customer reviews through its e-commerce platforms. NuLeaf has shown a remarkable three-year growth rate of 11,495%, and as a result, ranked 16th on the 2020 Inc 5000 list of fastest-growing private companies in the U.S.
NuLeaf is a market leader in the production and distribution of premium CBD products. NuLeaf’s cGMP-certified facility can produce 60,000 plant-based softgels per hour and it has a strong distribution channel.
The company is one of the most popular brands for hemp-derived CBD products across the U.S. Its products include cannabinoid tinctures, softgels, and topicals. NuLeaf has so far served about 330,000 customers through e-commerce platforms, and many more through other distribution channels.
About High Tide Inc.
High Tide is a leading retail-focused cannabis company with many physical stores as well as an e-commerce business. By way of revenue, it is the largest Canadian company doing retail business of recreational cannabis, with 104 stores across Ontario, Alberta, Manitoba, and Saskatchewan.
Its main e-commerce platforms are Grasscity.com, Smokecartel.com, Dailyhighclub.com, Dankstop.com, CBDcity.com, FABCBD.com, and BlessedCBD.co.uk.
Raj Grover, President and Chief Executive Officer of High Tide said that with the announcement, the company had increased its efforts to become a global leader for hemp-derived CBD products and e-commerce sales, even as the global CBD market is projected to reach US$56 billion by 2028.
He said that the company was growing in the THC, CBD, and accessories sector, and with the purchase of NuLeaf, was further vertically integrated with the CBD business. Mr. Grover added that NuLeaf was one of the few manufacturers in the U.S. with the technology for making vegan softgels, and that their product range included other products like Multicannabinoid oils and softgels.
Bo Shirley, Co-founder of NuLeaf Naturals, was equally enthusiastic about the emerging partnership. Jaden Barnes, Co-founder of NuLeaf Naturals said that as part of the High Tide organization, his company was well-positioned to increase its growth while remaining focused on giving customers a unique cannabis experience.
The new partnership will accelerate High Tide’s global CBD exposure and position it as a major CBD player globally. By the acquisition of NuLeaf, High Tide’s annual revenue outside of Canada will be approximately C$80 Million.
High Tide plans to pursue a range of synergies between NuLeaf and the FAB and Blessed CBD platforms, including packing and shipping products from NuLeaf’s cGMP-certified facility and creating new product lines such as FAB and Blessed CBD Multicannabinoid™ oils and softgels.
High Tide will offer NuLeaf products on its U.S. e-commerce platforms like CBDCity, GrassCity, and Smoke Cartel, and try to bring the Multicannabinoid™ proprietary oils and softgels to Canada and sell through its own network, and also introduce these products into the E.U. market through Blessed CBD and FAB CBD’s network in the U.S.
The whole scenario would strengthen High Tide’s position in the e-commerce space. NuLeaf’s position in the market will be highly conducive to High Tide achieving better financial results.
NuLeaf is well-positioned to make use of the growing global interest in CBD products as it will enable it to export their products, including Multicannabinoid™ vegan oils and softgels, produced at their facility in Denver, Colorado.
The transaction, which is expected to close in the coming weeks, is valued at US$39.05 million. The consideration for the 80% acquired by High Tide will be US$31.24 Million in common shares of High Tide.
Upon the closing of the transaction, NuLeaf Naturals will have approximately US$500,000 of cash, and an inventory of approximately US$500,000. Besides, High Tide has been given the option of acquiring all the remaining interests in NuLeaf.
This option will be exercisable at any time during a period of 3 years following the closing of the transaction. In addition to these, NuLeaf’s owners have the option to give High Tide the remaining interests in NuLeaf at the same enterprise value as the first option.
This option will be open for a period of 18 months, after the end of 18 months after the closing of the first transaction. The consideration for both options will be paid in cash. The High Tide shares issued after the payment of consideration to NuLeaf will be subject to a statutory hold for a period of four months and one day.