Mercer Park Archives - Green Market Report

The Mercer Park brand SPAC will begin trading next week on July 5 on the NEO exchange in Canada under the name GH Group, Inc. or Glass House Brands. The subordinate, restricted, and limited voting shares and warrants of Glass House were approved for listing on the NEO Exchange under the symbols “GLAS.A.U” and “GLAS.WT.U”, respectively. The symbol on the OTC is MRCQF, but markets are closed in the U.S. on Monday for the Independence Day holiday.

“With one of the strongest retail and wholesale networks in our industry combined with best-in-class cultivation processes and our scaled and highly efficient cost structure, we are exceptionally well-positioned to capitalize on the growing statewide and national consumer packaged goods (“CPG”) opportunity,” said Kyle Kazan, Glass House Chairman, and CEO. “We look forward to leveraging our leadership position in California to introduce high-quality, sustainably grown, craft cannabis to the market to support the health and enjoyment of our consumers, as well as our environment and our community.”

In 2020, Glass House reported that it grew revenue 185% year-over-year to $53 million and generated positive adjusted EBITDA, driven by its expanded cultivation and distribution footprint, improved supply chain and production efficiencies, and enhanced consumer brand profile. Including the assets of the Southern California Greenhouses and proposed Element 7 retail licenses, the combined company expects to generate full-year 2022 revenue and adjusted EBITDA of approximately $326 million and $104 million, respectively.

Glass House Highlights

Glass House currently operates a cultivation footprint of over 500,000 square feet, producing over 110,000 lbs. of biomass per year. Glass House also has an agreement to acquire an additional 5.5 million ft² state-of-the-art Southern California Greenhouse, an agricultural producer that will transition in phases to cannabis cultivation. This additional capacity is expected to increase Glass House’s current footprint to up to approximately 2.5 million ft² by 2023. The company’s total targeted long-term footprint of 6 million ft² is expected to be by far the largest cultivation capacity in California.

On the retail side, Glass House said it has generated 365,000 transactions, an average in-store ticket of $65 and an average delivery ticket of $101 in 2020. In addition to its current four dispensaries, Glass House has entered into an agreement to merge with 17 in-process retail licensed entities from California-based Element 7. These licenses, together with two new recent license awards, are expected to bring Glass House’s retail footprint to a total of 23 open locations by the end of the first half of 2022, representing the highest statewide store count of any single California cannabis operator.

Since beginning its CPG business in early 2020, Glass House added 550 retail doors to its CPG distribution, achieving a $50 million annualized revenue run rate for its wholesale business at year-end. Over the long term, the Company aims to build its wholesale network to over 700 dispensaries statewide.

Kazan’s & Farrar’s Control

Shareholders should note that CEO Kazan’s total voting power based on Equity Shares and MVS is approximately 32.7%. Kazan paid $202.53 (C$249.82) to buy over two million multiple voting shares of Glass House that represented 46.5% of the outstanding MVS.

Kazan bought 3,544,752 subordinate, restricted or limited voting shares of Glass House representing approximately 4.3% of the outstanding equity shares.

Glass House President Graham Farrar’ total voting power based on his equity shares and the MVS is approximately 20.6%. He paid $132.11 (C$162.96) for 1,321,087 MVS, representing approximately 27.8% of the total number of outstanding MVS.

Graham bought 1,224,289 Equity Shares, representing approximately 1.5% of the outstanding equity shares.

Mercer Park Brand Acquisition Corp.  (OTCQX: MRCQF), a Special Purpose Acquisition Company (SPAC), just announced its agreement to acquire Glass House Group, a vertically integrated California operator, for $567M USD.

The deal has a $1.024B equity valuation and a $691M approximate enterprise valuation, and with plans for a whopping 6M sqft greenhouse and 21 retail stores this year, making this the biggest California cannabis company to date. Glass House Group will be listed on the NEO Exchange (NEO:GLAS.U)

“When we formed Mercer Park BRND, we aimed to create a platform that could launch the first national cannabis brands in the United States,” said BRND Chairman Jonathan Sandelman. “We view successful cannabis brand-building as a combination of four factors: the ability to control quality biomass at a large scale; produce at the most competitive costs; offer the highest quality products; and deliver the best value proposition to consumers. This took us to California with its ideal growing climate and community of talented and experienced growers, and ultimately to Glass House Group and this incredible portfolio of assets and talent. Glass House has a track record of excellence across all four of these drivers and has established a top ranked flower brand in one of the most competitive cannabis markets in the world. Combined with the proposed combination with the Southern California Greenhouse asset and 17 proposed Element 7 retail licenses, Glass House Group is poised to become the largest, vertically integrated brand-building platform in California, the world’s largest cannabis market.”

Glass House consists of the following:

• Cultivation: Glass House currently operates a cultivation footprint of over 500,000 ft², producing over 110,000 lbs. of dry flower biomass per year. Glass House also has an agreement to acquire an additional 5.5 million ft² state-of-the-art Southern California Greenhouse, an agricultural producer that will transition in phases to cannabis cultivation. This additional capacity is expected to increase Glass House’s current footprint to up to approximately 2.5 million ft² by 2023. The Company’s total, targeted long-term footprint of 6 million ft² is expected to be by far the largest cultivation capacity in California.
• Retail: Across the four award-winning dispensaries it currently operates in California, Glass House generated 365,000 transactions, an average in-store ticket of US$65 and an average delivery ticket of US$101 in 2020. In addition to its current footprint, Glass House has entered into an agreement to merge with 17 in-process retail licenses from Element 7, a California company specializing in obtaining dispensing licenses. These licenses are expected to bring the Company’s retail footprint to a total of 21 open locations by the end of the first quarter 2022, representing the highest statewide store count of any single California cannabis operator.
• Wholesale: Since beginning its CPG business in early 2020, Glass House added 250 retail doors to its CPG distribution, achieving a US$50 million annualized revenue run rate for its wholesale business at year-end. Over the long term, the Company aims to build its wholesale network to over 700 dispensaries statewide.