Acreage Holdings Acquires Nevada-Based Deep Roots And Gets Acquired By Canopy

Acreage Holdings, Inc. (CSE: ACRG.U) (OTC: ACRGF) (FSE: 0ZV) announced that on April 17, its subsidiary, High Street Capital Partners agreed to acquire Nevada-based Deep Roots Medical in a deal valued at $120 million. The cash and stock transaction will mark Acreage’s entry into the Nevada market.

This deal plants another flag in Acreage’s growing empire bringing the footprint up to 20 (including pending acquisitions) making it the largest company in the US cannabis industry. The state is only home to three million residents, but the tourist population swells that number to 43 million. Arcview Market Research estimates that Nevada will generate nearly $800 million in legal cannabis sales by 2022.

Kevin Murphy, Founder, Chairman, and Chief Executive Officer of Acreage Holdings, Inc., commented, “We continue to deliver on our shareholder commitments to aggressively expand our presence in the West.  We could not be more excited for what we believe will become a leading operator in the state of Nevada, one of the most important states in the cannabis industry.”

Deal Terms

The total deal is valued at $120 million, including $100 million in common units of High Street Capital Partners, LLC and $20 million in cash.  High Street Capital Partners, LLC will issue up to 4,761,905 common units at a deemed value of $21.00 per unit.  Certain Deep Roots employees will have a portion of their issued common units be subject to a lock-up schedule.  The deal is expected to close in the second quarter of 2019.

Canopy Growth Acquisition

Both Acreage Holdings stock and Canopy Growth Inc. (CGC) stock rose yesterday on rumors that Canopy would acquire Acreage in a multi-billion deal. On Thursday morning, the companies jointly announced that they had reached an agreement for Canopy to acquire Acreage. Acreage shareholders will receive a payout of $300 million and will receive 0.5818 of a common share of Canopy for each Acreage Subordinate Voting Share held. The estimated valued of the deal is $3.4 billion.

Deep Roots Operations:

Deep Roots is a vertically integrated operation that includes cultivation, manufacturing & processing, a wholesale and distribution business, and seven retail dispensary licenses. The company described its operations as follows:

Cultivation: 18,000 SF of indoor flowering canopy for high-end flower housed in a 40,000 SF building in Mesquite, NV.

Manufacturing & Processing: Housed in the same 40,000 SF building in Mesquite, Deep Roots has a manufacturing facility and a butane extraction lab to produce their distillates and edibles.  The facility has ample space to build a Form Factory to expand its own internal house of brands throughout Nevada as well as other third-party brands it has agreements with.

Brands: Deep Roots currently manufactures and produces four internally developed brands.

  • Deep Roots utilizes its name for flower and concentrates and currently produces distillate cartridges, disposable pens, shatter, wax, and distillate for edibles, under the Deep Roots brand name.
  • Chillers hard candies has an extensive variety of flavors including watermelon, lemon, cinnamon, mango, and pineapple.  They are typically sold in a tube with ten hard candies, each containing 10mg of THC.
  • Bluebirds – a line of pre-rolled products that typically come in packs of one or three, made from various strains of Deep Roots’ high-quality flower.
  • Helix Twist – a line of gummies that come in six flavors including Sour Cherry, Key Lime, Blood Orange, Cucumber Serrano, and Ginger Peach.

Wholesale and distribution business: Deep Roots currently sells and distributes its Deep Roots, Chillers, Bluebirds, and Helix Twist branded products, and other third-party brands, into nearly 80% of the retail dispensaries in Nevada, making it one of the most connected wholesale operations in the state.

Retail Dispensary operations: Deep Roots has licenses to operate seven retail dispensaries, one of which is currently in operation, another is under construction, and five additional locations that are currently in development. Of the five remaining licenses to be developed, four are in the greater Las Vegas area and the fifth is in Reno.

 

Debra Borchardt

Debra BorchardtDebra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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