High Tide Acquires Leading Producer of CBD Wellness Products, NuLeaf Naturals for $31 Million
High Tide Inc. (TSXV: HITI) (Nasdaq: HITI) (FSE: 2LYA), a leading cannabis retail company having brick-and-mortar stores as well as e-commerce resources, has announced the acquisition of 80% interest in NuLeaf Naturals, LLC for US $31,240,000. It will also have a three-year option to acquire the remaining 20% of NuLeaf at any time.
This is High Tide’s sixth acquisition in 2021 in the global e-commerce arena, and third in the CBD space. All these transactions have together increased the company’s annual international revenue from about $10.6 million at the end of October 31, 2020, to about $80 million by the end of November 30, 2021.
About NuLeaf Naturals
NuLeaf is one of the most popular brands for hemp-derived CBD products across the U.S. Its products are manufactured at a cGMP-certified facility that enables the company to create innovative cannabinoid formulations even as it manages to exceed the highest levels of regulatory compliance.
The company is fully focused on producing safe, effectual, and valuable products. NuLeaf ranked 16th on the prestigious 2020 Inc. 5000 list of the fastest-growing private companies in the United States, on the basis of its 3-year growth rate of 11,495%.
About High Tide Inc.
High Tide is a leading retail-focused cannabis company with many physical, face-to-face stores as well as global e-commerce platforms. By way of revenue, it is the largest Canadian company doing retail business of recreational cannabis, with 105 stores across Ontario, Alberta, Manitoba, and Saskatchewan.
Its main e-commerce platforms are Grasscity.com, Smokecartel.com, Dailyhighclub.com, Dankstop.com, and more recently it has increased its presence in the CBD area through Nuleafnaturals.com, CBDcity.com, FABCBD.com, and BlessedCBD.co.uk.
Further, it has a wholesale distribution division under Valiant Distribution, which includes the licensed entertainment product manufacturer Famous Brandz. Among the important industry investors in High Tide is Tilray Inc., a global leader in cannabis research.
About the Acquisition
NuLeaf is a market leader in the production and distribution of premium cannabinoid wellness products and has quickly grown to become one of the most popular brands for premium cannabinoid wellness products across the U.S.
The company can produce 60,000 plant-based softgels per hour and is one of the few manufacturers in the United States with the ability to produce a vegan softgel. NuLeaf’s distribution channels are sound, and it has managed to get an expansion with Sprouts Farmers Market from 33 retail locations to an additional 235 stores. The company’s products include multicannabinoid™ tinctures, softgels, and topicals.
NuLeaf was established in 2014 with its headquarters in Denver, Colorado. From the time it was founded, the company has served about 330,000 customers through its e-commerce channel, and many more through its other distribution channels.
More than 25,000 5-star customer reviews have been received through its e-commerce platform. During the period of one year from September 30, 2020, to September 30, 2021, it had more than 5.1 million people visiting its site and an average order value of US$120.
Upon closing, NuLeaf will have approximately US$500,000 of inventory and approximately US$500,000 of cash. The acquisition was completed according to the terms of a definitive agreement, a copy of which is available on High Tide’s SEDAR profile.
High Tide acquired 80% of NuLeaf for 4,429,809 common shares of High Tide valued at US $31,243,000 at the rate of US $7.0529 per share, being equal to the average value of a High Tide share on the NASDAQ for the ten consecutive trading days preceding the closing of the acquisition. High Tide’s shares issued as consideration to NuLeaf are subject to a holding period of four months and one day.
Besides these, NuLeaf’s owners have agreed to give High Tide the option of acquiring the remaining interest in NuLeaf and becoming its sole owner. The remaining interest can be acquired at an enterprise value equivalent to the following 12 months of adjusted EBITDA and multiplied by 7.1.
This option can be exercised by High Tide at any time during the three years following the acquisition. High Tide, on its part, has agreed to give NuLeaf’s owners the option of giving NuLeaf’s remaining interest to High Tide at the above-said rate, with the right to exercise the option at any time during the 18 months, following the end of 18 months after the close of the acquisition. In the case of both options, if they are exercised, the consideration will be settled in cash.
In connection with the closing of the transaction, High Tide gave 60,000 stock options to employees and consultants of NuLeaf. The option is exercisable at the rate of CAD$8.02 for one High Tide share for a period of 3 years.