In a new blockbuster deal spanning the geographical breadth of the United States, Minnesota-based Vireo Growth (CSE: VREO) (OTCQX: VREOF) will more than double its cannabis footprint with the acquisition of four companies and a significant equity infusion for real estate investment trust Chicago Atlantic.
Under the terms of the complex deal, Vireo will get $75 million in new financing by issuing 120 million new shares of stock, and at the same time, it agreed to acquire four companies across the country through an all-stock deal worth nearly $400 million that was facilitated by Chicago Atlantic.
The move will bring Vireo’s cannabis footprint to seven states with 48 total dispensaries and more than 1 million square feet of cultivation canopy, with the acquisitions of Proper Brands in Missouri, Deep Roots Harvest in Nevada, WholesomeCo Cannabis in Utah, and The Flowery in Florida. The combined purchase price of all four companies is worth $397 million in Vireo stock , at a price of $0.625 per share. Several of the companies also have additional licenses for dispensaries and cultivation that have not yet been built out or opened.
Chicago Atlantic noted in its own press release that it is the largest shareholder of Vireo.
John Mazarakis, the co-founder of Chicago Atlantic, has been named the new CEO of Vireo, effective immediately, the company said in a press release Wednesday, and Tyson MacDonald has been appointed CFO. Vireo President Amber Shimpa will continue in her position, and as CEO of Vireo in Maryland, Minnesota and New York – the states where Vireo already held cannabis licenses.
Vireo’s new approach under Mazarakis will be to keep the management teams of all four acquisition targets in place, with a philosophy that each of them know their markets better than the new Vireo C-suite and are better positioned to drive success for shareholders.
“We are proud to introduce a new platform for operators to continue growing their businesses independently, embracing a decentralized approach that empowers local knowledge and expertise to flourish,” Mazarakis said in a release.
The new CEO said he had long watched all four of the acquisition targets grow as he worked directly with them on behalf of Chicago Atlantic. Mazarakis said that the megamerger is “poised for success in today’s operating environment, with an industry leading balance sheet, profitability and growth profile,” which will transform Vireo into “an acquirer of choice for select M&A activity in the future with other like-minded local operators.”
All four of the companies being acquired were vetted carefully before the deal was inked, the company said in a press release, and each has a proven track record of profitability.
“Vireo expects that each transaction will be accretive to the broader portfolio,” the company stated. “Each operator is incentivized to maximize profit and cash flow based on the deal structure that rewards performance on a stand-alone as well as on a consolidated basis.”
All four companies have built-in performance incentives wrapped into the deal, in the form of earnouts that would manifest at the end of 2026 if they all continue operating at the top of their respective markets, according to the release.
The acquisitions still must be approved by Vireo shareholders, though the company board of directors has already signed off on the deal. Closing is expected to take at least six months, Vireo projected. Agreements for the acquisitions of Proper Brands, Deep Roots Harvest and WholesomeCo Cannabis have already been signed, while The Flowery has entered a binding memorandum of understanding with Vireo.
The deal also includes the proprietary cannabis tech platform Arches, which would be used exclusively by the Vireo portfolio of cannabis companies across the U.S.
The new Vireo is projected to have estimated pro forma revenue of $394 million and an EBITDA of $94 million for the 2024 calendar year, the company estimated, with a balance sheet of $99 million in the bank against $78 million in net debt.
[[{“value”:”If all four acquisitions close, the deal will transform Vireo by more than doubling its marijuana industry footprint.
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