High Tide Expands US Reach Via $31.24M Acquisition Of 80% Stake In NuLeaf Naturals

Canadian cannabis retailer High Tide Inc. HITI HITI (FRA:2LYA) announced Monday that it has entered into a definitive agreement to acquire 80% of NuLeaf Naturals, LLC.

The move follows recent acquisitions of FAB CBD and Blessed CBD.

Deal Details

Based in Calgary, Alberta, the company agreed to pay $31.24 million for a stake in NuLeaf, with a three-year option to acquire the remaining 20% of the Colorado-based company at any time.

The consideration for the 80% stake in NuLeaf, will be paid in High Tide's common shares.

The transaction, which is subject to, among other things, receipt of required TSX Venture Exchange approval, is expected to close in the coming weeks.

Upon closing, NuLeaf Naturals will have approximately $500,000 of cash and an inventory of about $500,000.

What It Means For High Tide

Acquisition boosts High Tide's current U.S. revenue run rate by roughly 40% to approximately CA$70 million ($55.4 million).

NuLeaf has a strong financial profile which generated 71% gross margins and 25% Adjusted EBITDA margins in 2020. Founded in 2014, the company is a market leader in producing and distributing premium cannabidiol wellness products.

In addition, the deal is highly accretive for shareholders, as NuLeaf generated revenue of $19.4 million and adjusted EBITDA of $5.26 million during the 12 months ended September 30, of which direct-to-consumer e-commerce revenue represented $16.3 million.

High Tide said it plans to utilize NuLeaf's cGMP-certified facility to achieve manufacturing synergies with FAB and Blessed CBD and to launch Multicannabinoid SKUs across those platforms.

Through its new Multicannabinoid oils and softgels, NuLeaf continues to drive innovation in the cannabinoid market.

Moreover, NuLeaf has a strong distribution reach in the natural products channel and recently announced an expansion with Sprouts Farmers Market from 33 retail locations to an additional 235 stores, bringing this to a total of 268 Sprouts stores, in addition to other retail accounts across the U.S.

"With this announcement, we have doubled down on our efforts to become a global market leader with respect to hemp-derived CBD production and e-commerce sales," Raj Grover, president and CEO of High Tide, said.

What's Next?

Grover said that the acquisition of NuLeaf will "provide us with meaningful cross-selling synergies and margin enhancement opportunities for FAB and Blessed CBD."

Jaden Barnes, co-founder of NuLeaf Naturals, said that the deal "us to continue to deliver exceptional value to our customers and retail partners."

More recent news from High Tide:

• High Tide's 'Cannabis Chop Shop': Retail Shop, Discount Warehouse Vibe & Club-Membership Feel...Sound Familiar?
• Cannabis Retailer High Tide Ramps Up Its Retail Presence In Saskatchewan And Ontario

Price Action

High Tide's shares traded 1.97% higher at $6.20 per share during the pre-market session on Monday morning.

Photo: Courtesy of High Tide Inc.