Gaby Buys Mankind Cannabis Dispensary For $36.5M, Confirms $8.5M Private Placement

Shares of GABY Inc. GABLF are trading up almost 6% on Thursday afternoon, after the cannabis company announced a merger with Mankind Dispensary, one of the first licensed dispensaries in California.

GABY will pay a total of $36.5 million to acquire Mankind. The transaction will be completed via the issuance of 157,894,737 common shares of GABY at a price of C$0.05 per share, and a $5 million cash consideration.

In addition, Mankind will receive a secured non-convertible promissory note for $25.5 million with a term of 84-months; an annual coupon of 10% with balloon payments every 24-months for a total of $5 million; and a final balloon payment of $10.5 million at the end of the 84^th month.

In addition, Mankind CEO and co-founder James Schmachtenberger will become chief strategy officer of GABY. Mankind’s senior management team will also join GABY’s senior management team.

Private Placement

A brokered private placement of up to C$11.0 million ($8.5 million) — lead by Mackie Research Capital Corporation — was also announced.

It was subscribed by a syndicate that includes Haywood Securities.

The placement is expected to close around Dec. 21. According to the company, roughly 50% of the money has already been committed.

Proceeds from the private placement are expected to be used to fund the merger with Mankind, the company’s pro forma business plan, and other general corporate activities. 

Serendipitous Timing

GABY founder and CEO Margot Micallef highlighted the excitement around the California cannabis market, as new investors move into the space.

“Investors moving into or returning to the cannabis market are going to be looking at markets with the greatest opportunities and for the companies with the ability to execute," Micallef added. "California is like no other market in the U.S.: there are no dominant players at present, and many investors and Multi State Operators (MSOs) have stayed out of the market due to the cumbersome legislation, high taxation and the illicit market posing such a challenge."

Many cannabis operators who entered the "congested" California maket in 2019 on the heels of adult legalization "didn’t make it through," Micallef explained.

"GABY survived," she said. "The story of how we did this, and moreover how we plan to thrive in light of our expansion sets us apart from other operators.”

Schmachtenberger also celebrated the move.

“This is an exciting week for cannabis, with the MORE Act going before the house and the U.N. voting to remove cannabis from Schedule IV, showing that cannabis has medicinal value, we are seeing our industry take a huge step forward for legalization, and indeed global drug reform,” he said, calling the timing of GABY’s acquisition as serendipitous.

“Mankind has long been known as one of the most prominent cannabis dispensaries in California and has a unique approach to product curation and customer experience that has set it apart from other dispensaries," he added. "Gaby has been a significant player in creating high quality cannabis products with an eye towards sustainability. Both of our teams have shared a very similar vision for how to expand quality product offerings and a unique retail experience across the state. I believe that the talents and experience of our teams coming together give us the opportunity to become a dominant player throughout California and help shape how the industry evolves as it becomes increasingly mainstream."