Acreage sells its CannaBliss stores to Chalice brands for $ 6.5 million
Acreage Holdings, Inc. (OTC: ACRHF, ACRDF) sells its four dispensaries in Oregon to Chalice Brands Ltd. (CSE: CHAL) (OTCQB: CHALF). The divestiture is part of Acreage’s strategy of targeting only core states rather than trying to be the largest MSO in most states. The transaction is valued at $ 6.5 million. Acreage’s four dispensaries in Oregon carry the Cannabliss & Co. brand and the sale will end the company’s presence in the state. The company said in a statement that stores in Oregon are negatively affecting the company’s results and using management resources.
“This is a fantastic opportunity for Chalice to move closer to our goal of achieving our target market share in the State of Oregon while entering the Eugene market, and immediately enables the deployment of our Chalice products. in more stores. The addition of Cannabliss retail stores increases our footprint from twelve to sixteen stores, which represents an increase of nearly 130% in the retail footprint for this year alone. The Cannabliss team has done a tremendous job in Portland, Eugene and Springfield, Oregon, building historic businesses and a solid reputation for friendly customer service – exactly what Chalice looks for in a partner, ”said Jeff Yapp, CEO of Chalice. Chalice believes it can turn around the Cannabliss stores, which have apparently lost market share.
Chalice’s business footprint grows from twelve to sixteen stores in Oregon, representing an increase of nearly 130% in the current fiscal year. Cannabliss is expected to market Chalice Brands’ products immediately after service agreements are concluded, providing the potential to gradually increase total gross margins from around 42% to at least 52% within one year. Vertical sales of Chalice brand products are expected to represent approximately 25% of products sold within a year. With the acquisition of Cannabliss, Chalice said it will strengthen its customer base in the Oregon market, while significantly increasing the vertical margin contribution through the distribution of its Bald Peak Flower, Chalice, Private branded products. Stash, RXO and Elysium Fields in Cannabliss stores. .
“The sale of our Oregon operations represents another strategic step in our previously announced operating strategy,” said Peter Caldini, CEO of Acreage Holdings. “As we communicated previously, Acreage remains focused on our three key strategic objectives: driving profitability, strengthening our balance sheet and accelerating our growth in our core markets.”
Oregon dispensaries include two in Portland, one in Eugene, and one in Springfield. Two of the stores are in buildings listed on the National Register of Historic Places – Sorority House in Eugene and Firestation 23 in Portland. The Firestation 23 site was the first adult-only dispensary to open in the city of Portland and the first medical marijuana dispensary in Oregon.
“This transaction structure demonstrates our disciplined approach to capital allocation, as we avoid dilution while increasing both our sales and profitability. The positive cash flow generated by this acquisition will partially fund the deferred payment, providing an immediate opportunity to increase shareholder value of Chalice. With the addition of these four retail assets, Chalice continues to solidify our leadership position in Oregon as we achieve our market share goals for 2021, ”said John Varghese, executive chairman of the company.
Pursuant to the Asset Purchase Agreement, upon regulatory approval, Acreage will divest the assets of its four Cannabliss retail stores (including excess working capital of US $ 500,000) – located in Portland, Eugene and Springfield, Oregon – for a total consideration of US $ 6,500,000, consisting of a cash payment of US $ 250,000 at time of signing and a 10-month secured promissory note for US $ 6,250,000 bearing interest of 6% for the first 5 months and 10% for the remaining 5 months.