Ayr Wellness Inc. (OTCQX: AYRWF) is buying Pennsylvania-based PA Natural Medicine, LLC, which operates three licensed retail dispensaries in the Commonwealth of Pennsylvania. The deal is valued at $80 million but could see an extra $40 million if milestones are met. The deal is expected to close in the fourth quarter and Ayr said that it expects to rebrand the stores once the transaction is complete.
“Our goal across our footprint is to develop scale and meaningful presence in each of our markets. Today’s announcement builds on our already strong position in Pennsylvania, where we have built a tremendous foundation since entering the state just a few months ago. Our three Ayr Wellness stores, open an average of less than six months, are run-rating at over $7 million in annualized revenue per dispensary and our cultivation facilities are producing some of the best reviewed flower in the state,” said Jonathan Sandelman, Ayr Wellness Founder, Chairman and CEO.
PA Naturals has locations in the college towns of Bloomsburg and State College, as well as Selinsgrove, PA, and operates under the retail banner “Nature’s Medicine”. The terms of the transaction include upfront consideration of $80 million, made up of $20 million in stock, $25 million in seller notes, and $35 million in cash. An earn-out of up to $40 million, based on 2021 EBITDA hurdles, is payable in Q1 2022 and includes a maximum additional cash payment of $10 million with the remainder paid in stock and notes.
In 2018, PA Natural Medicine was described as a partnership between Nature’s Medicine, a medical marijuana company based in Arizona, and two Pennsylvania businessmen, Tony DePaul and Austin Meehan. As of June 3, the Pennsylvania Department of Health reported that 548,468 patients were registered with 349,272 active certifications.
“With such great momentum in this market, we are expanding our retail presence with the acquisition of PA Naturals, a three-store operation in central Pennsylvania with some of the best operating metrics in the state and a complementary footprint to our existing six licenses. We look forward to welcoming the great people of PA Naturals to the Ayr team,” he concluded.
Ayr Wellness said in August that it expects revenues to be approximately $800 million in 2022 and adjustedEBITDA at $300 million. The revenue estimate increased from $725 million to reflect contributions from recent acquisitions and additional expansion (including into Illinois). No doubt with this additional acquisition, the numbers could rise again.