Harborside To Buy Urbn Leaf And Loudpack, Creating 'Biggest Cannabis Platform In CA' - StateHouse Holdings

Harborside Inc. HBOR HBORF confirmed Monday it will buy UL Holdings Inc. ("Urbn Leaf"), a top California cannabis retailer and LPF JV Corporation ("Loudpack"), the company behind several award-winning cannabis brands in California. Upon completing the transaction, Harborside will be renamed to StateHouse Holdings and will trade under a new symbol - CSE: STHZ, subject to approvals.

Combined Company Highlights

• The Oakland, California-based cannabis company noted that its management believes the new combined company – StateHouse – will be the largest and most developed cannabis platform in the state of California.
• It is expected to have the biggest estimated annual revenue and brand market share among its current publicly-listed California peers. On a pro forma basis, management estimates that StateHouse would have generated gross revenue of around $165 million for the first nine months of 2021 (consisting of Harborsides’ $57.8 million, Urbn Leaf’s $45.9 million and Loudpack’s $61.4 million).

"Since reconstituting the Company's board of directors last year, our team embarked upon an ambitious mission to create a unique platform capable of consolidating California and driving significant growth through added scale. With these transactions, we are working to create a west coast cannabis powerhouse," Matthew Hawkins current chairman and interim CEO of Harborside stated. "The combination of high-quality assets, increased scale and experienced leadership will drive tremendous value for shareholders.

Transaction Summary

The total consideration for the transaction will be provided via the issuance of 151.43 million subordinate voting shares of Harborside (SVS) and the assumption and restructuring of debts and other obligations as well as the issuance of 2.0 million warrants at a strike price of $2.50 per SVS.

Upon closing the transaction, it is expected that the current shareholders of Harborside, Loudpack and Urbn Leaf will obtain around 35%, 39% and 26% of StateHouse, respectively, on a fully diluted basis and assuming conversion of all multiple voting shares of Harborside (MVS) to SVS.

In relation to the transaction, the management signed a letter of intent with Pelorus Equity Group to finalize the real estate financing of $77.3 million of non-dilutive real estate debt financing, providing significant growth capital for the business.

Under the deal, the existing CEO of Urbn Leaf, Ed Schmults, will be hired as CEO of State House and will join the new company’s board of directors. Marc Ravner, the current CEO of Loudpack, is expected to be appointed as president of StateHouse and will also join the board of directors.

The transactions are expected to close in the first half of 2022, subject to approval by Harborside shareholders, the CSE, regulatory approval and customary closing conditions.

Expected Benefits to Shareholders

• Statewide retail presence - 15 retail locations across key urban areas of California;
• Brands with leading market share;
• Vertical integration and outsized margin potential;
• Scaled cultivation platform.

Price Action

Harborside closed Monday's market session 2.16% lower at 62 cents per share.

Photo: Courtesy of Daniel Norin on Unsplash