Fire & Flower Holdings Corp. (TSX: FAF) (OTCQX: FFLWF) is buying Friendly Stranger Holdings Corp. in a deal valued at over $17 million. The deal is expected to close in the fourth quarter of 2020. An additional $4.6 million (approximately) will be set aside subject to authorizations for additional stores.
Friendly Stranger owns and operates 11 licensed cannabis retail stores across the province of Ontario with 4 additional cannabis stores in the pipeline to be licensed and operational by the end of the fourth quarter of 2020. The stores are called the “Friendly Stranger”, “Hotbox” and “Happy Dayz” and will continue to operate under those brand names.
“The acquisition of Friendly Stranger is transformative for Fire & Flower and is a product of our financially disciplined approach to aggregation in the sector. It will immediately put us in a leading position in the major Ontario market, and it allows us to increase the potential of the acquired stores using the proprietary capabilities of our Hifyre™ digital retail and analytics platform” shared Trevor Fencott, Chief Executive Officer of Fire & Flower. “The acquisition will bring some of Ontario’s longest established Cannabis brands into the Fire & Flower portfolio, transforming us into a multi-banner operator that appeals to a larger cross-section of cannabis customers. We are also excited to add Friendly Stranger’s demonstrated expertise in the high-margin accessories business to our team. We look forward to continuing to welcome Friendly Stranger customers into these stores and to our Spark Perks customer engagement program that already counts more than 150,000 members across the country.”
In September, Fire & Flower delivered second-quarter revenue of $28.6 million including sales of $23.4 million in the retail channel, $4.3 million in the distribution channel, and sales of $0.9 million in the digital retail and analytics channel. At that time, the company said it was waiting for licensing at a number of locations in Ontario and intended to open these stores once final licensing was complete. During the onset of the COVID-19 public health crisis, Fire & Flower saw meaningful sales with basket sizes increasing as consumers purchased larger volumes of product. The company said it is now seeing consumer behavior return to normal seasonal levels and increased popularity in large format cannabis products, vapes, beverages, and edibles.
“Friendly Stranger is very pleased to be joining Fire & Flower, the leader in cannabis retail across the country,” shared James Jesty, President of Friendly Stranger. Friendly Stranger will benefit from the best practices set by the market leader including their technology-enabled approach and the scale brought from their operations. Through multiple brands in the Ontario market, Fire & Flower will benefit from the ability to serve diverse customer segments in the growing cannabis market.”