TORONTO, April 28, 2021 (GLOBE NEWSWIRE) – PRESS RELEASE – Multistate operator Red White & Bloom Brands Inc. (RWB) is pleased to announce that its new subsidiary, RWB Florida LLC, has completed the acquisition of all of the issued and outstanding shares of Acreage Florida Inc. from High Street Capital Partners LLC, a subsidiary of Acreage Holdings Inc. RWB also completed the acquisition of certain owned and leased real estate assets used in Acreage Florida’s operations.
RWB Florida is licensed to operate medical cannabis dispensaries, a processing facility and a cultivation facility in the state of Florida. The deal also includes the sale of property in Sanderson, Florida that includes more than 15 acres of land, an approximately 11,000-square-foot facility for cultivation and a 4,000-square-foot freestanding administrative office building. In addition, RWB Florida has eight leased stores in prime locations throughout the state.
“The Florida cannabis market is poised for tremendous growth and is forecasted to be a top-five state by the year 2025,” Red White & Bloom CEO Brad Rogers said. “With approximately 450,000 medical cannabis patients currently registered in Florida, we see this as an amazing growth opportunity for the company. Combine this with a population of 20 million and we are delighted this deal has been finalized and look forward to delivering the highest quality medical products to the market.”
Jim Frasier, formerly of Acreage, has been appointed the position of Florida general manager for Red White & Bloom. “Our employees are impressed with Red White & Bloom’s commitment to the local communities as they expand their ESG program around the environment, jobs, social justice and governance,” he said. “We are excited to play a major role in the benefits cannabis can bring to the state of Florida.”
RWB, RWB Florida and High Street Capital entered into a definitive stock purchase agreement on Feb. 21, 2021, as amended on April 27, to acquire Acreage Florida and the Florida real estate from High Street Capital for an aggregate purchase price of U.S. $60,000,000 in cash, stock and other considerations including:
- An up-front cash payment of U.S. $5,000,000 previously paid on execution of the stock purchase agreement;
- A cash purchase price payment of approximately U.S. $16,500,000 made on closing;
- U.S. $7,000,000 in common shares of RWB, amounting to 5,950,971 RWB shares based on a volume-weighted average price of RWB’s shares on the Canadian Securities Exchange (CSE) for the five trading days prior to closing, subject to a 12-month lock-up agreement dated April 27, 2021 between High Street Capital and RWB pursuant to which one-sixth of the RWB shares will be released to the High Street Capital each month commencing the sixth month after entering into the lock-up agreement, or immediately upon a change of control transaction;
- U.S. $28,000,000 in vendor takeback promissory notes (comprised of a U.S. $10,000,000 seven-month note bearing interest at 8% per annum, a U.S. $18,000,000 13-month note bearing interest at 8% per annum and an approximate U.S. $3,500,000 five-business-day note bearing interest at 1% per annum);
- The promissory notes are secured by a pledge agreement between RWB Florida and High Street Capital pursuant to which the shares of Acreage Florida were pledged to High Street Capital and the promissory notes are guaranteed by the RWB; and
- The parties entered into a transition services agreement dated April 27, 2021 whereby High Street Capital agreed to provide certain transition services to RWB with respect to continued operations of Acreage Florida by RWB until Sept. 1, 2021, including certain financial reporting and general accounting support, the use of the Botanist brand until such time as RWB receives regulatory clearance in respect of the High Times brand or other alternative brand in Florida, as well as certain human resources and information technology support.
To assist in the funding of the transaction:
- RWB closed on an aggregate principal amount of U.S. $11,000,000 unsecured debentures on April 21, 2021 from arm’s-length investors (the “debenture purchasers”). The debentures bear interest at the rate of 12% per annum and mature 150 days from the date of issuance. In consideration of the purchase of the debentures by the debenture purchasers, RWB issued the investors an aggregate of 900,000 RWB shares at a price of $1.184 per origination share; and
- RWB and RWB Florida entered into a binding expression of intent with four arm’s-length investors (the “term sheet investors”) pursuant to which the term sheet investors would invest U.S. $8,000,000 to purchase:
- An aggregate amount of U.S. $3,000,000 of equity RWB Florida (representing approximately 3.75% of the equity of RWB Florida) subject to the right of RWB to repurchase this equity from the debenture purchasers for the amount equal to the earnings before interest, taxes, depreciation and amortization (EBITDA) of RWB Florida with a multiple of eight times; and
- purchase an aggregate principal amount of U.S. $5,000,000 unsecured convertible debentures of RWB (the “term sheet debentures”). The principal of the term sheet debentures plus interest in the amount of 24% (8% per annum) will be due and payable on the third anniversary of the term sheet debentures; provided that the four term sheet investors may convert their term sheet debentures into RWB shares at a conversion price equal to U.S. $2.75 per RWB share; provided, further, if the RWB shares are valued at U.S. $6.00 per RWB share, RWB may force conversion. RWB will have the option to repay the term sheet debentures after one year along with 8% annual interest.
- To date, a total of U.S. $5.5 million towards the purchase of term sheet equity and term sheet debentures has been funded and used by RWB toward the cash purchase price. The term sheet investors, RWB Florida and RWB will enter into certain definitive agreements in respect of their investments in the coming days.
A finder’s fee is payable on the transaction.