Valens keen on Acquiring Premium Cannabis Retailer Citizen Stash for CA$54.3 Million
Valens Company Inc. (TSE: VLNS) (OTCQX: VLNCF) is all set to purchase Citizen Stash Cannabis Corp. (OTCMKTS: EXPFF) (TSXV: CSC), a high-end cannabis maker for $54.3 million in a stock deal. This move will help the cannabis processor expand outside its contract manufacturing customer base.
Over the years, Valens Company has helped other cannabis businesses to manufacture and distribute various products across the recreational market in Canada. However, this recent deal will allow Valens to gain complete control of one of the leading premium brands in the country.
The president of Valens in an interview shared that, “Citizen Stash is a very unique strategic opportunity for a valid number of reasons. It gives us access to that premium segment, but it also allows us to enter the flower space in an asset-light way.”
As of now, Citizen Stash lacks a major production facility and instead works with a third-party network of growers. They then re-sell the strains under their own brand name.
Fallows added that this model of the company is highly scalable and doesn’t demand a major investment in terms of physical infrastructure.
Since cannabis earned legal status in Canada, several companies are trying to expand their reach beyond their original product offerings. This onset of competition from over 700 producers has made it difficult for firms to become profitable.
Details of Valens Citizen Stash Deal
Valens started exploring brand acquisitions following the onset of the COVID-19 pandemic when many customers were forced to cut costs thereby resulting in a loss of bulk shipment sales.
The announcement comes about six months after Valens announced its contract manufacturing deal with Citizen Stash for producing pre-rolls and infused gummy products for the firm.
As Cannabis 2.0 came up, Valens started making major arrangements to its business model. When all of Valens producer customers were refocusing internally to streamline their infrastructure to suit the COVID environment, they impacted them as well.
This is because they were not purchasing those big bulk shipments as quickly as they anticipated at the beginning of the year.
Sales of Citizen Stash products touched $21.1 million over the past 12 months. This is good enough for the company to be ranked sixth under the premium brand category in Canadian according to Hyfire Retail, the cannabis industry data provider.
While the demand for premium cannabis products has been steady over the past year, the segment has lately caught the attention of larger producers. Recently, Canopy Growth Corp made an announcement that it would be purchasing Supreme Cannabis Inc. in a deal for $435 million in April.