Cannabis Retailer: High Tide's Stock Slightly Up On Closing Of $31.24M NuLeaf Acquisition

Cannabis retailer High Tide Inc. HITI HITI (FSE:2LYA) revealed Monday that it has wrapped up a previously announced acquisition of an 80% interest in NuLeaf Naturals, LLC.

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

Deal Details

The company, based in Calgary, Alberta purchased a stake in NuLeaf for $31.24 million in stock.

Under the terms of the agreement, High Tide has a three-year option to acquire the remaining 20% of NuLeaf at any time.

The 4.43 million High Tide's common shares issued at $7.0529 per share pursuant to the consideration are subject to a hold period of four months and one day.

What It Means For High Tide

The transaction bolsters High Tide's current U.S. revenue run rate by roughly 40% to approximately CA$70 million ($55.4 million), with NuLeaf having a strong financial profile that generated 71% gross margins and 25% Adjusted EBITDA margins in 2020.

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.

Moreover, the closing represents High Tide's largest acquisition to-date, 6th global e-commerce related acquisition in 2021 and 3rd in the CBD space, taking international revenue from approximately CAD$10.6 million on October 31, 2020, to approximately CAD$80 million annual run-rate as of today.

NuLeaf was founded in 2014 and is a market leader in producing and distributing premium cannabidiol wellness products.

In addition, 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.

The acquisition "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 earlier.

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."

High Tide reported that 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.

Co-founders Bo Shirley and Jaden Barnes will retain 20% ownership of NuLeaf and have taken on consulting roles with High Tide to assist the company's continued expansion in the United States and globally.

Barnes said that the deal allows "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

HITI Price Action

High Tide's shares traded 0.95% higher at $6.36 per share during the pre-market session on Monday morning.

Photo: Courtesy of High Tide Inc.