Glass House Brands Inc. (OTCQX:GLASF) (OTCQX:GHBWF) (NEO:GLAS.A.U) (NEO:GLAS.WT.U) has completed definitive agreements to acquire 100% of the equity interests in three retail assets: two operating retail dispensaries and one retail dispensary slated to open in Q3 2022.
The retail dispensaries currently operate under the name Natural Healing Center, a retail dispensary chain in California's Central Coast area. The two operating retail dispensaries had revenue of $15.3 million from April 2021 through March 2022 with EBITDA margins above 20%.
Glass House is acquiring the two operating retail dispensaries in Lemoore and Morro Bay for approximately $22.6 million through a combination of approximately $5.7 million in cash and the remainder in Glass House equity shares. The third retail dispensary in Turlock, California, which is currently under construction, is expected to open in Q3 2022.
The company expects to complete the acquisition of the Turlock store upon its opening with Glass House Brands owning 100% of the equity interests. Calculation and payment of consideration for the acquisition of Turlock will occur at the end of its sixth full quarter of operations at 6x its annualized EBITDA in that quarter.
The consideration will be paid 80% in stock priced at the 25-day volume-weighted average price of Glass House equity shares as of that quarter-end and 20% in the form of an unsecured promissory note bearing interest of 8% annually and maturing after the four-year anniversary of the closing date.
Based on the current performance of NHC's operating dispensaries and the market fundamentals in Turlock, Glass House said the Turlock store can eventually achieve 'steady state' annual revenues of approximately $10 million with an EBITDA margin of roughly 20%.
Over the measurement period, the pricing for the Lemoore and Morro Bay stores is approximately 1.56x revenue.
At the close of each acquisition, Glass House will be purchasing the businesses of these dispensaries and will enter into a 5-year lease at each location with three renewal options for a total of up to 20 years.
The company has entered into a credit agreement amendment with a U.S.-based private credit investment fund for an incremental $10 million term loan to fund the cash portion of the acquisition. The incremental term loan bears a 10% coupon and matures on October 31, 2022. In consideration of the incremental term loan, the company is issuing 175,000 of its warrants currently listed on the NEO Exchange, having an exercise price of $11.50 per warrant and having an expiry date of June 26, 2026. The company is exploring options for adding additional capital and liquidity to support the above acquisitions and continued growth.
Glass House is providing approximately $6.7 million in secured pre-close loans that accrue interest at 15%. These loans will only be issued once all of the acquisition documents are finalized and executed, and the value of these loans will be offset against the closing consideration.
Photo: Courtesy of CNW Group/Glass House Brands Inc.
Related News
Glass House Brands Completes Acquisition Of PLUS Cannabis Edibles Brand For $25.6M
Cannabis Industry Reacts To President Biden's Clemency News
Glass House Full Year Revenue Grows 44% To $69.4M, Adjusted EBITDA Loss Reaches $11.8M
