- Greenrose Acquisition Corp. (NASDAQ:GNRSU), a SPAC created to invest in legal cannabis, fell Monday after the firm announced plans to buy four pot firms for a total of $210M.
- GNRSU reached deals to purchase Shango Holdings Inc., Theraplant LLC, True Harvest LLC and Futureworks LLC (doing business as The Health Center).
- The acquisitions will give Greenrose legal-weed operations in seven states – Arizona, California, Colorado, Connecticut, Michigan, Nevada and Oregon.
- Plans call for Greenrose to pay $170M in cash, $15M in stock and $25M in debt for the firms.
- After the deal closes, the combined companies will have about $140M in cash on the books.
- Greenrose said in a statement that the acquisitions will create “a vertically integrated and cash flow positive platform positioned for significant growth.”
- “The companies we are bringing to market fully align with Greenrose’s core objectives,” CEO Mickey Harley said. “We are targeting strategic assets in several key states that present opportunities for further consolidation as we seek to deepen our presence, particularly in the West.”
- Management added that the deal will leave GNRSU “well capitalized and cash-flow positive,” while also immediately growing adjusted EBITDA and leaving “ample liquidity to execute Greenrose’s strategic growth objectives.”
- The company said the combined entities had $83M in 2020 pro forma revenues, which it expects to grow to $158M in 2021 and $230M in 2022.
- The operations also had a collective $32M in pro forma 2020 adjusted EBITDA, which the company sees rising to $56M in 2021 and $90M in 2022.
- Greenrose intends to raise a fresh $150M from qualified investors through a private stock and debt placement to partly pay for the acquisitions, as well as to cover general corporate purchases.
- However, either the M&A deal or the new fundraising disappointed investors. Greenrose’s investing units briefly opened 0.2% higher on the news, but quickly turned red and ended the day at $10.99, down 3.2% on the session.
- Still, the special purpose acquisition company's units are still up 9.9% from the $10 they went public at about a year ago. Each unit consists of one Class A share and 0.75 warrants granting the holder the right to buy one additional share at $11.50.
- Meanwhile, Greenrose shares (GNRS), which trade separately from the units, fell 1.2% to $9.96 on the merger news.
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