SNDL to Buy Dutch Love, Delays Earnings

SNDL has also delayed its earnings and warns of charge.

SNDL Inc. (Nasdaq: SNDL)  reported that it has entered into an agreement with Lightbox Enterprises Ltd. to buy four cannabis retail stores operating under the Dutch Love Cannabis banner in a deal valued at $7.8 million. the deal is expected to close by the end of May 2023.

As part of the deal, SNDL will get the rights to three Dutch Love stores in British Columbia and one store in Ontario. The company said that the combined assets generated annual revenue of $11.5 million in 2022, with an average gross margin of 36.5%.

“We are excited by this opportunity to expand SNDL’s retail network,” said Zach George, Chief Executive Officer of SNDL. “We believe we have chosen the top performing Dutch Love stores located on some of the best real estate available. This acquisition creates a new opportunity to work with Canada’s top licensed producers to deliver high-quality cannabis and experiences to the Dutch Love target shopper.”

Deal Terms

SNDL said it was going to pony up $1.5 million in cash to Lightbox. It would also involve the cancellation of the $3.0 million debt owed by Lightbox to SNDL. In addition, $3.3 million payable in common shares of SNDL at a price per share based on the 10-day VWAP of the SNDL shares on the Closing Date to be issued to Lightbox.

The company said that the completion of the acquisition is expected to further solidify SNDL’s position as a multi-banner cannabis retail operator by enhancing the company’s market share and its exposure to a broader consumer base in two key markets.

Yet, just last month Green Market Report reported that the company said it was closing its Alberta operations and laying off 85 facility employees.

Delayed Earnings

The company also said last month that it expected to report record net revenue and net cash when its next earnings report drops at the end of March. That has now been pushed out to April 14. Last month, SNDL said most of the sales would likely come from its alcohol sales, as SNDL also happens to be Canada’s largest private-sector liquor retailer.

Now the company is saying in addition to the positive sales numbers, it also expects to report a material provision for impairment of goodwill related to the acquisition of Alcanna Inc. (a former wholly owned subsidiary of the company, acquired in March 2022 as previously announced, which amalgamated with the company effective January 1, 2023). The decline in the trading price of shares of Nova Cannabis Inc., which was a subsidiary of Alcanna at the date of acquisition has fallen more than 50% since the acquisition, and that has warranted a material non-cash adjustment.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor 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 Master's degree in Business Journalism from New York University.

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