Ayr Strategies Enters into Agreements to Expand Footprint with Strategic Acquisitions in Florida and New Jersey

Ayr has announced the proposed acquisition of Liberty Health Sciences, a vertically integrated operator in Florida, and GSD NJ LLC, a licensed operator in New Jersey.

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TORONTO, Dec. 22, 2020 (GLOBE NEWSWIRE) -- PRESS RELEASE -- Ayr Strategies, a vertically integrated cannabis multi-state operator, today announced the proposed acquisition of Liberty Health Sciences, a vertically integrated operator in Florida, in a stock-for-stock transaction valued at $290 million. Additionally, Ayr announced the proposed acquisition of the membership interests in GSD NJ LLC, a licensed operator in New Jersey, for upfront consideration totaling $101 million. Including these and other pending transactions, Ayr will have operations in seven states covering 73 million people, which include four adult-use markets and three medical markets.

“Today’s announcements represent a transformational next step for Ayr as a leading multi-state operator in the U.S.,” said Jonathan Sandelman, chairman and chief executive officer of Ayr Strategies. “Our strategy has always been to go deep in the best markets, targeting attractive assets in limited-license states with large populations, where we can build a vertically integrated presence and have a significant edge. New Jersey will be a leading force in adult-use legalization in 2021, and we look forward to working with the regulators to ensure a safe and robust roll-out of the adult-use program. Florida has one of the country’s most robust and rapidly growing medical programs, and we are acquiring one of the largest operators in terms of store count.

“2021 will be a year of material growth for Ayr in the adult-use market. In Massachusetts, Ayr is already a market leader in wholesale and medical sales and will open three adult-use stores in the under-served Greater Boston area in 2021. Two of our newest states – New Jersey and Arizona – will roll out adult-use for the first time, and Ayr is excited to help lead that transition.”

Sandelman continued, “Our assets are the most productive in the industry, and we intend to bring this same operational excellence to Florida and New Jersey. We see an incredible opportunity to elevate Liberty’s cultivation, product selection and dispensary experience to the level of quality, productivity, selection and service we have consistently achieved in our existing markets with the deep bench of talent and know-how we already have in place. We are thrilled that our disciplined and targeted approach to expansion has enabled us to build this terrific footprint from a position of strength, with a team that consistently demonstrates operational excellence and great support from our debt and equity investors.”

Transaction Highlights

Florida

Ayr has signed a definitive agreement to acquire Liberty Health Sciences in a stock-for-stock combination that will take the form of a Plan of Arrangement under the Business Corporations Act (British Columbia). Liberty shareholders will receive 0.03683 Ayr shares for each Liberty share held, equating to approximately 13.1 million new Ayr shares. Total purchase price is equivalent to ~US$290 million based on the closing price of Ayr shares as of Dec. 21, 2020. Liberty will have the right to nominate one new member to the Ayr Board of Directors at closing, increasing Ayr’s total number of board members to seven.

The assets being acquired from Liberty include a 387-acre cultivation campus in Gainesville, Fla., with over 300,000 square feet of current production facilities in operation, 28 open retail dispensaries, seven completed and ready-to-open dispensaries, and seven dispensaries currently under construction. Liberty currently employs 335 people, all of whom are expected to be retained by Ayr.

Total consideration paid of approximately $290 million represents a forward multiple of approximately 4.8x 2022 estimated adjusted EBITDA. Ayr plans to spend approximately $15 million in capital expenditures in 2021 to improve and expand the Gainesville cultivation campus, as well as expand Liberty’s dispensary footprint.

The Liberty acquisition is subject to customary closing conditions, regulatory approvals, including HSR review, Liberty shareholder approval and court approval of the Plan of Arrangement. Shareholders holding approximately 29% of Liberty’s common shares have agreed to support and vote in favor of the proposed transaction.

Dorsey & Whitney LLP and Stikeman Elliott LLP acted as legal advisors to Ayr. Canaccord Genuity Corp. acted as a financial advisor to Ayr and provided a fairness opinion to the board of directors of Ayr.

New Jersey

Ayr has signed a binding agreement to acquire licensed operator Garden State Dispensary (GSD), one of the 12 existing vertical license holders in the State of New Jersey and one of the state’s original six alternative treatment centers (ATCs). GSD has three open dispensaries, the largest footprint of any operator, at heavily trafficked highway locations throughout the central region of the state, as well as 30,000 square feet of cultivation and production facilities in operation. An additional 75,000 square feet is currently under construction. GSD currently employs 110 people, all of whom are expected to be retained by Ayr.

Total up-front consideration of $101 million includes $41 million in cash, $30 million in stock and $30 million in the form of a promissory note. Earn-outs based on exceeding revenue target thresholds in 2022 will be capped at a maximum of $97 million and payable in a combination of cash, promissory notes and exchangeable shares. Including the maximum earn-out consideration, the Company estimates this represents a forward multiple of approximately 4x 2022 adjusted EBITDA.

The GSD acquisition is subject to final due diligence, customary closing conditions and regulatory approvals.