Two major Canadian cannabis sellers are poised to create the largest pot retailer in the country by revenue.
Calgary retailer High Tide Inc., which operates the Canna Cabana chain of stores in three provinces, announced a merger deal Friday to take up Toronto-based Meta Growth Corp., which runs the Meta Cannabis and NewLeaf Cannabis chains.
Once combined, the proposed new entity expects to have 63 stores in Alberta, Saskatchewan, Manitoba and Ontario and about $133 million in annualized revenue, the two companies said.
It would also be the top cannabis retailer in Ontario by corporate-owned store count — and will have “high-graded its Alberta portfolio to hit the maximum stores allowed” in that province, they said.
The deal announced Friday would see High Tide acquire all TSX Venture Exchange-traded shares of Meta, for 0.824 High Tide shares per Meta share. Once the deal closes, Meta’s shareholders would have a total stake of about 45.625 per cent in the combined company.
High Tide and Meta said they plan on “nearly doubling” their current combined footprint to about 115 locations by the end of next year, “with a focus on Ontario, Canada’s largest cannabis market” — and to show “cost and operational synergies” of about $8 million to $9 million a year within 12 months of closing their deal.
Their immediate post-merger count of 63 stores accounts for “optimizations (and) closures” as well as “transactions that have yet to close.” Those include Meta’s purchase of locations in Kitchener and Waterloo, and High Tide’s planned $12 million selloff of its KushBar retail stores to U.S.-based Halo Labs.
“Both companies have complementary retail footprints and similar proven operational efficiency models,” Meta CEO Mark Goliger said Friday in a release. “We can immediately leverage synergies, increase margins and have double the scale for the combined company’s owned IP and private label initiatives.”
High Tide, as “the first publicly-traded Canadian cannabis retailer in our peer group to generate positive adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), we are excited to demonstrate the tremendous strength of this combined entity,” CEO Raj Grover — who would lead the combined company — said in the same release.
Industry observers have been expecting a surge in mergers and acquisitions in the cannabis sector, as profitable companies seek to expand, betting on more widespread legalization in the U.S. market after November’s presidential election.
Within Canada, where recreational cannabis has been legal since October 2018, the onset of the COVID-19 pandemic and related lockdowns are also believed to have spurred more consumer demand for such products.
Retail data published Friday by Statistics Canada showed domestic cannabis stores having booked $201 million in sales in June 2020 alone, up 7.9 per cent from May 2020 and up 119.3 per cent from June 2019.
Major Canadian cannabis production companies such as Aphria — already an investor in High Tide — and Canopy Growth are reported to be interested in acquisitions. — Glacier FarmMedia Network