Charlotte’s Web Holdings (TSX: CWEB) is the latest Canadian cannabis firm to make arrangements to enter the US market. The company this morning announced that it has entered into an option purchase agreement with Stanley Brothers USA Holdings that will enable the firm to acquire the US operator upon a federal legalization event.
Stanley Brothers USA, a cannabis wellness incubator with operations in the states of Colorado, Florida, and California, is a related party of Charlotte’s Web. Two directors of the firm, Joel Stanley and Jared Stanley, are co-founders of Charlotte’s Web and also sit on the firms board of directors. Both will be resigning from Charlotte’s Webs board to reduce conflicts of interest.
The US operator currently is focused on cannabis 2.0 products, where it combines full spectrum cannabis extracts with botanical ingredients under the ReCreate brand. The firm currently produces and sells chocolates, gummies, and tinctures, which are sold across three states. Further expansion plans are reportedly in progress within eight additional states as well.
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The option to purchase the firm is for a five year period, with the ability to be extended by a further two years. The arrangement enables Charlotte’s Web to acquire the operator on the earlier of three years from the effective date of the option and a federal legalization event.
The option was purchased for US$8.0 million in cash. Upon exercise the total purchase price of the acquisition will be calculated based on “weighted application of 3.5 times revenue and 13.5 times EBITDA multiples.” A warrant to acquire up to 10% of the outstanding shares and convertible securities of Stanley Brothers has also been issued.
Charlotte’s Web last traded at $6.11 on the TSX.
Information for this briefing was found via Sedar and Charlotte’s Web Holdings Inc. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
