Red White & Bloom (CSE: RWB) this morning announced the closing of the transaction to enter the Florida market. The entrance to the market comes via the purchase of Acreage Holdings’ (CSE: ACRG) operations within the state.
With the closing of the transaction, the company now owns a license to cultivate, process, and sell cannabis via its own dispensaries within the state of Florida. Included with the purchase is a 15 acre property in Sanderson, Florida that contains an 11,000 square foot cultivation facility and a freestanding administrative office building, as well as 8 leased stores throughout the state.
The transaction saw RWB acquire the asset for a total purchase price of US$60.0 million, with US$5.0 million paid in cash on the execution of purchase agreement as well as US$16.5 million in cash to be made on closing. US$7.0 million is then to be paid via the issuance of 6.0 million shares, and the remainder, US$28.0 million, is to be paid via promissory notes.
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Those notes consist of a US$10.0 million 7 month note with 8% interest, a US$18.0 million 13 month note at 8% interest, and a US$3.5 million 5 business day note with 1% interest. The notes are secured by the Florida assets and guaranteed by the company. Included with the transaction is certain supports until September 1, 2021.
As a means of funding the transaction, RWB entered into a number of arrangement to acquire the cash needed to close the deal. First, the firm closed a US$11.0 million unsecured debenture financing with an interest rate of 12% and a maturity of 150 days from the date of issuance from certain arms-length investors. As a sweetener for the transaction, the company also issued 900,000 shares to the purchasers at $1.18 per share.
The company also sold off a portion of the Florida assets to certain investors to fund the transaction, with a total of US$8.0 million raised via this method. US$3.0 million comes from the sale of equity in the asset, amount to 3.75% of the Florida operations, with the company eligible to repurchase the stake at a price of 8x EBITDA of the Florida asset. A further US$5.0 million in unsecured debentures at 8% per annum over 3 years was issued, with a conversion price of US$2.75 per share. To date, US$5.5 million has been funded under these arrangements, with definitive agreements to be entered into in the next few days.
Red White & Bloom last traded at $1.47 on the CSE.
Information for this briefing was found via Sedar, and Red White & Bloom Brands. 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.
