- Creates national footprint with right to operate in 200+ facilities
across 17 states and territories.
- Strategically combines geographically complementary, like-minded,
market-leading multi-state operators focused on quality, operating
excellence and profitable growth.
- Positioned to compete in rapidly transforming industry due to
scale, commitment to localism, innovation, growth and superior product
mix portfolio.
- Recent acquisitions pave the way for expanded wholesale
distribution, national brands and infrastructure coast to coast
Company Website:
http://www.harvestinc.com
PHOENIX -- (Business Wire)
Harvest
Health & Recreation, Inc. (CSE:
HARV, OTCQX:
HRVSF) ("Harvest"), a vertically integrated and highly
diversified cannabis company with a strong financial and growth profile,
would become the largest multi-state operator (MSO) in the U.S.
following closing of a definitive agreement signed on April 22, 2019
(the "Business Combination Agreement") to acquire (the "Transaction")
Verano
Holdings, LLC ("Verano"), as previously announced by
press release dated March 11, 2019. Verano is one of the largest
privately held multi-state, vertically integrated licensed operators of
cannabis facilities with an extensive portfolio of premium branded
products.
Transaction Overview
Pursuant to the terms of the Business Combination Agreement,
securityholders of Harvest and Verano will become securityholders in the
combined company which will carry on the business of Harvest and Verano
(the "Resulting Issuer"). The Transaction will be carried
out by way of a plan of arrangement under the Business Corporations
Act (British Columbia) whereby, among other things: (i) Harvest
shareholders will exchange their shares in Harvest for equivalent
securities in the Resulting Issuer on a 1:1 basis, and (ii) Verano
securityholders will be issued a combination of subordinate voting
shares and multiple voting shares in the capital of the Resulting Issuer
in connection with the indirect exchange of their securities in Verano.
The all-stock Transaction has an implied total acquisition cost of
approximately USD $850 million, based on a Harvest share price of CND
$8.79. In addition, the Transaction will include completion of various
Verano pipeline acquisitions, with a combined value of approximately USD
$36 million, additional pipeline acquisitions that are in negotiations
and may include certain entities that are ancillary to Harvest’s
business, payable in shares of the Resulting Issuer.
In connection with the Transaction, an application will be made to list
the Resulting Issuer's subordinate voting shares for trading on the
Canadian Securities Exchange (the "CSE").
The Transaction will require, among other approvals, the approval of at
least 66 2/3% of the votes cast by each class of Harvest shareholders at
a special meeting expected to take place in June 2019 (the "Harvest
Meeting"). The board of directors of Harvest has unanimously
approved the Transaction and will recommend that Harvest shareholders
vote in favour of the Transaction at the Harvest Meeting.
The Transaction is subject to, among other conditions, court approval,
CSE approval, receipt of applicable shareholder approvals at the Harvest
Meeting, certain additional regulatory approvals customary for a
transaction of this nature, and the satisfaction or waiver of all
closing conditions.
The Business Combination Agreement includes covenants typical of
transactions of this nature, including with respect to non-solicitation,
a right granted to each party to match superior proposals, and
provisions entitling each party to a fiduciary-out. In addition, Harvest
and Verano have each agreed to pay a termination fee to the other party
upon the occurrence of certain events.
Full details of the Transaction will be included in the management
information circular of Harvest describing the matters to be considered
at the Harvest Meeting which will be made available on SEDAR under the
issuer profiles of Harvest at www.sedar.com.
Eight Capital acted as Harvest's financial advisor and INFOR Financial
Inc. acted as financial advisor to the special committee of Harvest's
board of directors. In addition, Eight Capital and INFOR Financial Inc.
have each provided an opinion to the board of directors of Harvest that,
as of the date of the opinion and subject to the assumptions,
limitations and qualifications on which the opinions were based, the
consideration being paid by Harvest in connection with the Transaction
is fair, from a financial point of view, to Harvest.
The Transaction is expected to offer synergies related to enhanced scale
of the combined operations, which upon completion is expected to make
Harvest the largest MSO, as measured by facilities allowed, state
footprint, revenue and permitted facilities in today’s market – despite
the potential growth based on changes in U.S. federal laws. Following
closing, Harvest will be able to operate in up to 200+ facilities in 17
U.S. states and territories, including 123 retail dispensaries.
Combining Verano and Harvest, Harvest is one of the few, U.S.
multi-state operators with a track record of operational profitability.
"Expanding our national footprint is paramount at Harvest and allows us
to continue on the path to profitable growth for shareholders," said
Jason Vedadi, Executive Chairman of Harvest. "This accretive transaction
will improve our position by strategically expanding our operating base
to realize the benefits of scale. From day one, both companies focused
on consistent revenue and profit growth. We are excited to bring
Verano's premium brands, depth of management and sound operations into
Harvest."
Steve White, CEO of Harvest, added, "We have long viewed the acquisition
of Verano as a strategically, financially and operationally compelling
opportunity that brings immediate value to shareholders of both
companies. The acquisition provides us with the combined skills and
capacity to bring the promise of cannabis' future value to the masses.
The talent we've assembled with significant, relevant real-world
experience provides Harvest a deep bench from which to scale
responsibly. And to ensure we meet the expectations of a seamless,
value-creating integration, we've engaged one of the leading global
management consulting firms in the world to assist us."
On the completion of the Transaction, Harvest will gain:
-
Operations in 11 states and territories, including seven cultivation
licenses, and 37 retail licenses;
-
Vertically integrated, cash-flow positive operations that generated
net revenue exceeding $31 million in 2018;
-
Proven executive team with retail, manufacturing, branding, logistics,
regulatory and operational experience and 300 employees;
-
Ethanol extraction technology at pharmaceutical grade levels,
providing new market opportunities for cannabis biotech, food and
beverage verticals;
-
Premium portfolio of proprietary strains and precisely dosed products
crafted by artisan chefs that rounds out Harvest's product offering
with 150 SKUs spanning medical and adult-use;
-
Total cultivation expansion capacity of 900,000 sq. ft in Illinois,
Nevada & Maryland;
-
Operations and/or management of nine Zen Leaf™ dispensaries; and
-
A newly developed headquarters in Chicago that will serve as a new hub
of operations for Harvest's operations east of the Mississippi River.
"Our teams are architects of change in the cannabis industry. Both are
geographically complementary and focused on operational excellence and
bringing safe, high-quality, precisely dosed artisanal cannabis options
to our customers," said George Archos, Verano Co-founder and CEO. "We
are crafting a brighter way forward together to grow Harvest's
leadership and profile in key markets and deliver significant value to
customers and shareholders."
Acquisitions Lay Foundation for Expanding
Wholesale Network
"Verano's acquisition brings strong leadership to Harvest's expanding
wholesale network," continued Steve White. "Verano's wholesale product
strategy and expertise has enabled penetration of 80 percent of the
dispensaries in each state in which it operates. By combining that with
our recently announced planned acquisitions of Falcon
(2/14/19), and CannaPharmacy
(4/9/19), and their strong distribution networks, Harvest is now well
positioned to build several national cannabis brands that will meet the
full spectrum of consumer and patient needs."
About Harvest Health and Recreation
Harvest Health & Recreation, Inc. is one of the first consistently
profitable, vertically integrated cannabis companies with one of the
largest footprints in the U.S. Harvest’s complete vertical solution
includes industry-leading cultivation, manufacturing, and retail
facilities, construction, real estate, technology, operational, and
brand building expertise — leveraging in-house legal, HR and marketing
teams, along with proven experts in writing and winning state-based
applications. The company has more than 750 employees with proven
experience, expertise and knowledge of in-house best practices that are
drawn upon whenever Harvest enters new markets. Harvest’s executive team
is comprised of leaders in finance, compliance, real estate and
operations. Since its founding in 2011, Harvest has grown its footprint
every year, has been ranked as the third largest cultivator in the U.S.
and, subject to completion of announced acquisitions, will have rights
to operate up to 200 facilities, of which 123 are retail locations,
across the U.S. Harvest shares timely updates and releases as part of
its regular course of business with the media and the interested public.
For more information, visit: https://www.harvestinc.com/.
Facebook: @HarvestHOC
Instagram:
@HarvestHOC
Twitter:
@HarvestHOC
Forward-looking Statements
This press release contains statements which constitute
"forward-looking information" within the meaning of applicable
securities laws, including statements regarding the plans, intentions,
beliefs and current expectations of Harvest with respect to future
business activities. Forward-looking information is often identified by
the words "may," "would," "could," "should," "will," "intend," "plan,"
"anticipate," "believe," "estimate," "expect" or similar expressions and
include information regarding: the closing of the acquisitions of
Falcon, CannaPharmacy and Verano, including satisfaction of the
conditions to closing of such acquisitions; expectations regarding the
size of the U.S. cannabis market; the ability of the Company to
successfully achieve its business objectives; plans for expansion of
Harvest; expectations for other economic, business, and/or competitive
factors; expectations for future financial performance; expected
synergies arising from the Transaction; timing and receipt of the
required shareholder, court, stock exchange and regulatory approvals for
the Transaction; the timing and ability of Harvest and Verano to satisfy
the conditions precedent to completing the Transaction; the anticipated
timing for the holding of the Harvest Meeting in respect of the
Transaction; and, the anticipated timing to, and the completion of, the
closing of the Transaction.
Investors are cautioned that forward-looking information is not based
on historical facts but instead reflects Harvest management's
expectations, estimates or projections concerning future results or
events based on the opinions, assumptions and estimates of management
considered reasonable at the date the statements are made. Although
Harvest believes that the expectations reflected in such forward-looking
information are reasonable, such information involves risks and
uncertainties, and undue reliance should not be placed on such
information, as unknown or unpredictable factors could have material
adverse effects on future results, performance or achievements of the
Resulting Issuer. Among the key factors that could cause actual results
to differ materially from those projected in the forward-looking
information are the following: the potential impact of the Transaction
on relationships, including with regulatory bodies, employees,
suppliers, customers and competitors; failure to achieve expected
synergies arising from the Transaction and related integration risk;
changes in general economic, business and political conditions,
including changes in the financial markets; the ability of the Resulting
Issuer to raise debt and equity capital in the amounts and at the costs
that it expects; adverse changes in the public perception of cannabis;
decreases in the prevailing prices for cannabis and cannabis products in
the markets that the Company operates in; adverse changes in applicable
laws; adverse changes in the application or enforcement of current laws,
including those related to taxation; the inability to locate and acquire
suitable companies, properties and assets necessary to execute on the
Company's business plans; and increasing costs of compliance with
extensive government regulation. This forward-looking information may be
affected by risks and uncertainties in the business of Harvest and
market conditions.
Should one or more of these risks or uncertainties materialize, or
should assumptions underlying the forward-looking information prove
incorrect, actual results may vary materially from those described
herein as intended, planned, anticipated, believed, estimated or
expected. Although Harvest has attempted to identify important risks,
uncertainties and factors which could cause actual results to differ
materially, there may be others that cause results not to be as
anticipated, estimated or intended. Harvest does not intend, and does
not assume any obligation, to update this forward-looking information
except as otherwise required by applicable law.
Non-IFRS Financial and Performance Measures
In this press release, Harvest refers to certain non‐IFRS financial
measures such as EBITDA, being Earnings Before Interest, Taxes,
Depreciation and Amortization. EBITDA measures do not have any
standardized meaning prescribed by IFRS and may not be comparable to
similar measures presented by other issuers. "EBITDA" is defined as
income from operations before depreciation and amortization and certain
other charges. Harvest uses EBITDA as an indicator of its principal
business activities prior to consideration of how its activities are
financed and the impact of taxation and non-cash depreciation and
amortization. EBITDA is used by many analysts as one of several
important analytical tools and management of Harvest believes it is
useful for providing readers with additional clarity on Harvest's
operational performance prior to consideration of how its activities are
financed, taxed, amortized or depreciated. For a quantitative
reconciliation, please refer to the Company's MD&A filed from time to
time.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190423006003/en/
Contacts:
Alex Howe
(202) 271-7997
ahowe@harvestinc.com
Source: Harvest Health & Recreation, Inc.
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