Columbia Care Inc. (OTCQX: CCHWF) has signed an agreement to buy California-based Project Cannabis for approximately $57 million in Columbia Care stock and approximately $12 million in cash from the proceeds of a concurrent sale of Project Cannabis’ real estate assets. The deal is expected to close in the fourth quarter of 2020.
“Project Cannabis perfects our operating model in California, enables us to maintain supply chain continuity, optimize profitability and gives us the full suite of capabilities, products and brands needed to be a market leader in the state,” said Nicholas Vita, CEO of Columbia Care. “In addition to being immediately accretive to Columbia Care’s adjusted EBITDA and cash flow, Project Cannabis expands our portfolio of unique products, nationally recognized premium brands, wholesaling expertise, and adult-use knowhow, all of which are scalable into the rest of our US markets.”
Based, in Los Angeles, Project Cannabis owns the branded products Triple Seven and Classix. It operates a 32,000 ft cultivation facility, along with three adult-use retail dispensaries in prime locations in North Hollywood, Downtown Los Angeles, and Studio City. In San Francisco, it operates one adult-use retail dispensary in the Soma district, close to both professional baseball and basketball stadiums. This location also houses one of the only permitted consumption lounges in San Francisco.
The acquisition of Project Cannabis will enable Columbia Care to materially increase its scale throughout California and position its wholesale and manufacturing operations as one of the leading suppliers in the state. Going forward, Columbia Care’s new manufacturing facility in San Diego will manufacture and package all extracted products and concentrates for Project Cannabis. Leveraging its distribution network of more than 100 dispensaries throughout the state, Project Cannabis will continue to sell its entire brand portfolio while simultaneously cross-selling Columbia Care’s medically focused products, recently acquired products and brands from the TGS acquisition, and several new consumer-oriented product lines such as the Amber Live Resin portfolio, Columbia Care’s fastest-growing product in California.
Vita added, “The expected impact upon gross margins on targeted SKUs should be approximately +10% to 15%. At a price of approximately 1.3x current year revenue (excluding synergies), Project Cannabis is growing substantially faster than the overall market and materially adds to Columbia Care’s critical mass and scale in California, while immediately contributing to the state level and consolidated cash flow and Adj. EBITDA.”
“Although we have been approached by virtually every conceivable strategic partner, we believe our culture, focus on producing the highest-quality products through the most effective brand architectures and extensive distribution network aligns perfectly with Columbia Care’s vision to grow its footprint into the market leader in California,” said Project Cannabis EVP Cameron Wald. “Our team has done a tremendous job cultivating and building sought-after brands while making our Project Cannabis dispensaries trusted destinations for a consistently excellent retail experience. Together, we plan to immediately capitalize on synergies in our wholesale business and expand our product offerings by leveraging Columbia Care’s state of the art pharmaceutical-grade GMP manufacturing facility to accelerate our profitable growth.”