NEW YORK, April 18, 2019 (GLOBE NEWSWIRE) -- Acreage Holdings, Inc. announced that on April 17, its subsidiary, High Street Capital Partners, LLC entered into an agreement to acquire 100% of Deep Roots Medical LLC, a vertically integrated cannabis operator in Nevada, for a total deal value of $120 million to be paid in common units and cash. Deep Roots marks Acreage’s entry into Nevada, increasing the company’s total state footprint to 20 (including pending acquisitions) - the largest in the US cannabis industry. With a population of three million, and tourism that attracts 43 million visitors per year, Nevada is estimated to generate nearly $800 million in legal cannabis sales by 2022, according to Arcview Market Research.
Kevin Murphy, Founder, Chairman, and Chief Executive Officer of Acreage Holdings, Inc., commented, “We continue to deliver on our shareholder commitments to aggressively expand our presence in the West. We could not be more excited for what we believe will become a leading operation in the state of Nevada, one of the most important states in the cannabis industry.”
Deep Roots Operations:
Deep Roots’ vertically integrated operations include cultivation, manufacturing & processing, a wholesale and distribution business, and seven retail dispensary licenses. A description of the operations follows:
Cultivation: 18,000 SF of indoor flowering canopy for high end flower housed in a 40,000 SF building in Mesquite, NV.
Manufacturing & Processing: Housed in the same 40,000 SF building in Mesquite, Deep Roots has a manufacturing facility and a butane extraction lab to produce their distillates and edibles. The facility has ample space to build a Form Factory to expand its own internal house of brands throughout Nevada as well as other third-party brands it has agreements with.
Brands: Deep Roots currently manufactures and produces four internally developed brands.
- Deep Roots utilizes its name for flower and concentrates and currently produces distillate cartridges, disposable pens, shatter, wax, and distillate for edibles, under the Deep Roots brand name.
- Chillers hard candies has an extensive variety of flavors including watermelon, lemon, cinnamon, mango, and pineapple. They are typically sold in a tube with ten hard candies, each containing 10mg of THC.
- Bluebirds - a line of pre-rolled products that typically come in packs of one or three, made from various strains of Deep Roots’ high-quality flower.
- Helix Twist - a line of gummies that come in six flavors including Sour Cherry, Key Lime, Blood Orange, Cucumber Serrano, and Ginger Peach.
Wholesale and distribution business: Deep Roots currently sells and distributes its Deep Roots, Chillers, Bluebirds, and Helix Twist branded products, and other third-party brands, into nearly 80% of the retail dispensaries in Nevada, making it one of the most connected wholesale operations in the state.
Retail Dispensary operations: Deep Roots has licenses to operate seven retail dispensaries, one of which is currently in operation, another is under construction, and five additional locations that are currently in development. Of the five remaining licenses to be developed, four are in the greater Las Vegas area and the fifth is in Reno.
- Mesquite: The Deep Roots Harvest dispensary, which is about 7,500 SF is located in a 40,000 SF building on the same property as its 40,000 SF cultivation and processing facility on a 10.4 acre site. Mesquite is a picturesque golf and retirement community with a robust tourism industry. The closest dispensary to Mesquite is about 80 miles away and maintains very strict licensing restrictions and no additional licenses can be issued until the population increases by more than 100%. Given its limited competition area, the Mesquite dispensary enjoys some of the highest annual revenues in the state.
- West Wendover: A dispensary license to operate in West Wendover, a small town with a very robust tourism industry with the closest dispensary 120 miles away. The West Wendover location will be approximately 10,000 SF and is anticipated to open in late 2019.
Deal Terms: The total deal is valued at $120 million, including $100 million in common units of High Street Capital Partners, LLC and $20 million in cash. High Street Capital Partners, LLC will issue up to 4,761,905 common units at a deemed value of $21.00 per unit. Certain Deep Roots employees will have a portion of their issued common units be subject to a lock-up schedule. The deal is expected to close in the second quarter of 2019.
