Cannabis Co. Harborside Completes Purchase Of Pre-Roll Brand Sublime For $43.8M

California-focused cannabis company Harborside Inc. HBOR HBORF confirmed Monday it has finalized its previously announced purchase of an Oakland-based cannabis manufacturer Sublimation Inc. (“Sublime”) for $43.8 million.

Sublime has been in business for five years, during which it has developed popular and affordable Fuzzies branded pre-rolls. These pre-rolls are said to be a leading brand in the Golden state. The company, which ended 2020 with a 7.9% California pre-roll market share, is also known for its vapes and roll-your-own flower kits.

"We are thrilled to complete this acquisition and add Sublime's talent and its iconic, award-winning California brand with an exceptional product offering and consumer following to our growing brand portfolio," Peter Bilodeau, interim CEO of Harborside stated. "With a strong balance sheet and deep cultivation and brand-building expertise, our unified company is well-positioned to support the continued growth of the Sublime brands while expanding the reach of Harborside's existing branded product portfolio in both the retail and wholesale markets."

Transaction Details 

Oakland, California-based vertically integrated company acquired 100% of the issued and outstanding shares of Sublime for a total of $43.8 million. The total purchase price consists of around $38.4 million payable in multiple voting shares of the company (amounting to some 207,579.66 multiple voting shares) and $5.4 million in cash (of which $3.4 million was used to repay Sublime's debt).

In connection with the purchase, Harborside signed a lock-up agreement with specific Sublime shareholders regarding multiple voting shares to be obtained. Under it, shareholders agreed not to sell, assign or transfer the multiple voting shares received. 

Furthermore, the company provided options to buy a total of 536,875 subordinate voting shares to certain Sublime employees, who are now employees of Harborside. Each option is exercisable into one subordinate voting share of the Company at a price of $1.78 that will expire in five years.

The role of a financial advisor was taken by ATB Capital Markets Inc., while legal counsels to Harborside were Duane Morris LLP and Cassels Brock & Blackwell LLP. Financial advisor and legal counsels to Sublime were VIII Eight Capital, and CGL LLP, and Gowling WLG (Canada) LLP, respectively.

Deal Synergies 

According to Harborside, combining Sublime’s brands and production capacities with the company’s premium cannabis cultivated at its Salinas, California cultivation facility should significantly contribute to its gross profit and EBITDA.

Via this acquisition, Harborside will expand the outreach of Sublime and the company's branded products across California and will advance Sublime’s marketing activities.

What’s more, the company plans to license the Fuzzies California lifestyle brand in other legal adult-use markets across the U.S.

Price Action 

Harborside’s shares closed Friday’s market session 6.45% lower at $1.45 per share.

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