SOL Global Investments Corp. (CSE: SOL) (OTCQB: SOLCF), the owner of 3 Boys Farms, which holds one of Florida’s original 14 operating and vertically integrated medical marijuana treatment center licenses, has entered into a binding letter of intent with cannabis-focused private equity firm Merida Capital Partners to acquire Merida’s Michigan subsidiary, MCP Wellness, Inc. in a deal valued at $150 million.
The company said that MCP Wellness was a special-purpose vehicle (SPV) created to invest in Michigan cannabis operations and currently holds the rights to acquire two Michigan cultivation licenses, a processing license, and 3 fully licensed cannabis provisioning centers in Michigan with a fourth provisioning center scheduled to open in Ann Arbor in May. MCP Wellness also has plans to open an additional nine municipally-approved provisioning centers by August 2019. Assuming MCP Wellness’ expansion plans are completed as scheduled, SOL Global and Merida expect Michigan gross revenue from the acquired business to generate in excess of $61 million in the calendar year 2019 and more than $121 million in 2020.
“MCP Wellness’s acquisition of the Michigan licenses, once completed, will be the perfect complement to 3 Boys’ operations in Florida, as both states offer tremendous growth potential and this partnership will combine talent, industry-leading genetics and processing, plus cultivation and retail expertise across two of the most coveted and revenue generating markets in the U.S.” said Brady Cobb, CEO of SOL Global. “This acquisition will help ensure that SOL Global, through the MSO, will be able to execute on its visionary vertically integrated cultivation and retail strategies in the United States’ most promising cannabis markets.”
According to the company statement, the deal will consist of $35 million in cash and $115 million in equity consideration in CannCure, resulting in Merida owning approximately 42% of CannCure. With regards to the cash, $9 million will be sourced from cash on hand and $24 million will come from a private placement financing of CannCure equity and/or debt.
“Over the past several years, Michigan has become one of the country’s largest medical cannabis markets, projected at nearly $900 million for 2019, according to New Frontier Data,” said Mitch Baruchowitz, managing partner of Merida Capital Partners. “With adult use coming in 2020, Merida is excited by the opportunity to combine one of Michigan’sleading retail operations with a Florida operator while aggressively pursuing additional acquisition targets across several states that will help create a more diversified company.”
The statement also noted that SOL Global and Merida Capital are in active negotiations on acquisitions for the MSO in additional states. Specifically, SOL Global is finalizing negotiations to acquire an industry leading California cultivator and processor with superior genetics and a chain of prime retail dispensaries in California, and at the conclusion of that transaction, SOL Global intends to pursue a “going public transaction” of the MSO.
New Frontier Lawsuit Against SOL Global
Andy Defrancesco, the Chief Investment Officer of SOL Global, has been sued for defamation, conspiracy to defame and tortious interference in a business relationship by New Frontier Data’s Giadha Aquirre De Carcer. Merida Capital is also an investor in New Frontier Data. Defrancesco has said he is an investor in Prohibition Partners, a research company that had a falling out with New Frontier over a report the two companies agree to create jointly.
When the relationship was terminated, both companies released a report with similar sounding titles within a week of each other. Both companies have accused the other of borrowing intellectual property and threatened lawsuits.
Merida has defended New Frontier and the spat doesn’t seem to be having any effect on the relationship with SOL Global.