Ayr Strategies (OTCQX: AYRWF) is buying Liberty Health Sciences (OTC: LHSIF) in an all-stock deal valued at $290 million. In addition, Ayr said it was buying the membership interests in GSD NJ LLC, a licensed operator in New Jersey, for upfront consideration totaling $101 million. Including these and other pending transactions, Ayr said it will have operations in seven states covering 73 million people, which include four adult-use markets and three medical markets.
“Today’s announcements represent a transformational next step for Ayr as a leading multi-state operator in the U.S.,” said Jonathan Sandelman, Chairman and Chief Executive Officer of Ayr Strategies. “Our strategy has always been to go deep in the best markets, targeting attractive assets in limited-license states with large populations, where we can build a vertically integrated presence and have a significant edge. New Jersey will be a leading force in adult-use legalization in 2021, and we look forward to working with the regulators to ensure a safe and robust roll-out of the adult-use program. Florida has one of the country’s most robust and rapidly growing medical programs, and we are acquiring one of the largest operators in terms of store count.
In this transaction, Ayr will be getting Liberty’s 387-acre cultivation campus in Gainesville, FL with over 300,000 sq. ft. of current production facilities in operation; 28 open retail dispensaries, seven completed and ready-to-open dispensaries, and seven dispensaries currently under construction. Liberty currently employs 335 people, all of whom are expected to be retained by Ayr. Ayr said it plans to spend approximately $15 million in capital expenditures in 2021 to improve and expand the Gainesville cultivation campus, as well as expand Liberty’s dispensary footprint.
New Jersey Assets
In addition to Liberty, Ayr is buying licensed operator Garden State Dispensary, which is one of the 12 existing vertical license holders in the State of New Jersey and one of the state’s original six alternative treatment centers (ATCs). GSD has three open dispensaries, the largest footprint of any operator, at heavily trafficked highway locations throughout the central region of the state, as well as 30,000 sq. ft. of cultivation and production facilities in operation. An additional 75,000 sq. ft. is currently under construction. GSD currently employs 110 people, all of whom are expected to be retained by Ayr.
The company said that the total up-front consideration of $101 million includes $41 million in cash, $30 million in stock, and $30 million in the form of a promissory note. Earn-outs based on exceeding revenue target thresholds in 2022 will be capped at a maximum of $97 million and payable in a combination of cash, promissory notes, and exchangeable shares. Including the maximum earn-out consideration, the company estimates this represents a forward multiple of approximately 4x 2022 adjusted EBITDA.
Mr. Sandelman added, “Our assets are the most productive in the industry, and we intend to bring this same operational excellence to Florida and New Jersey. We see an incredible opportunity to elevate Liberty’s cultivation, product selection and dispensary experience to the level of quality, productivity, selection, and service we have consistently achieved in our existing markets with the deep bench of talent and know-how we already have in place. We are thrilled that our disciplined and targeted approach to expansion has enabled us to build this terrific footprint from a position of strength, with a team that consistently demonstrates operational excellence and great support from our debt and equity investors.”