Cronos To Acquire 4 Redwood Subsidiaries, Expand Growth In US CBD Market

Cronos Group Inc CRON announced Friday it reached an agreement to acquire a CBD company with exposure to the United States.

What Happened

Cronos entered into an agreement to acquire four of Redwood Holding Group's operating subsidiaries, the company said in a press release. Redwood is a maker and distributor of hemp-derived CBD-infused products for the skincare and other segments. The company's products include pure hemp oil that includes natural phytocannabinoids and terpenes found in the plant.

Redwood has exposure to the retail and hospitality space in the U.S. through its own brand called Lord Jones.

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Why It's Important

Redwood offers a best-in-class platform with hemp-based CBD formulations that "stand for quality and consistency," Cronos Chairman, President and CEO Mike Gorenstein said in the press release. Under Cronos' umbrella, the company can better address the notable demand for skincare and other consumer products which Redwood addresses.

"The inspiration for our company was simple, we wanted to create a brand we wished we could buy as adult consumers," said Robert Rosenheck, Redwood co-founder. "We chose Cronos Group because they share our vision and values and will help us continue our mission.

As part of the agreement, Cronos will pay around $300 million, net of Redwood's cash and debt of which $225 million will be paid in cash with the rest in newly issued Cronos stock. The deal remains subject to customary closing conditions and regulatory approvals and is expected to close in the third quarter of 2019.

Shares of Cronos traded higher by 4% at $13.25 in Friday's pre-market session.

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