Village Farms International, Inc. (NASDAQ: VFF) (TSX: VFF) is buying Colorado-based CBD-platform Balanced Health Botanicals (BHB) in a deal valued at $75 million. Balanced Health owns and operates one of the largest brands in the hemp-derived cannabidiol (CBD) market in the United States, providing Village Farms with immediate entry into the US CBD market in a consumer products category adjacent to the high-THC cannabis market, as well as the broader consumer packaged goods (CPG) wellness arena. Balanced Health is a profitable business and the acquisition is expected to be immediately accretive to net income.
“Since US federal legalization in late 2018, hemp-derived CBD products, as well as other cannabidiol-based products, have been part of our comprehensive strategy focused on high-value, high-growth plant-based consumer packaged goods opportunities in cannabis,” said Michael DeGiglio, CEO, Village Farms International. “As a well-established, profitable leader in the US retail CBD market, Balanced Health is the right opportunity, at the right time, to take our next major step forward in anticipation of regulatory clarity that will propel the growth of this nascent market. Balanced Health provides a prudent means by which to invest in our cannabis strategy, providing immediate accretion to profitability, meaningful upside potential within the current Balanced Health business and multiple additional strategic opportunities to drive significant additional shareholder value over the medium and long term.”
The flagship brand for BHB, CBDistillery was founded in Denver in 2016 and has since evolved into one of the largest CBD brands in the market, sold in retailers nationwide. The all-new BOTA is a line of premium plant-powered skincare and supplements that combines powerful natural botanicals with hemp-derived CBD. BHB develops and sells high-quality, CBD-based health and wellness products. With an overriding focus on quality and compliance, Balanced Health has established a diverse portfolio of CBD and other cannabinoid products, including ingestible, edible and topical applications that are distributed via e-commerce and brick and mortar retail channels. Its e-commerce platform, CBDistillery (www.theCBDistillery.com), is a top-five US CBD brand and top-ranked website within the CBD category, with more than 30,000 orders monthly and a significant repeat customer base according to Brightfield Group.
He added, “Importantly, the addition of the Balanced Health platform provides us with another potential pathway to participate in the US high-THC cannabis market, when permitted to do so, that could enable us to more rapidly access the market, in advance of our plans to convert our more than 5.5 million square feet of high-tech greenhouse facilities in West Texas – one of the most favorable environments for cannabis cultivation in the continental US – for large-scale, low-cost production of cannabis.”
The deal consists of $30 million in cash and $45 million in common shares of the company. It is expected to contribute annualized sales of more than $30 million at an annualized adjusted EBITDA margin of in excess of 15% in 2022. While Balanced Health is only CBD at this time, Village Farms also noted that the deal provides an additional potential pathway to the US high-THC cannabis market;
“We are ecstatic to join forces with Village Farms, a leader in the global cannabis and CBD industries,” said Chase Terwilliger, Chief Executive Officer of Balanced Health Botanicals. “Since 2016, our nimble team has worked tirelessly to create not only a leading brand of which we are extremely proud but also one that is truly making an impact in the lives of consumers by providing everyday premium products. We’ve been able to achieve and maintain a top-five market share in the CBD market, while generating positive cash flow. As part of the Village Farms organization, we will be able to take the next steps in our growth strategy, with the opportunity for prudent, return-focused investments, to further expand our market share and drive efficiencies, with a focus on continued profitability.”