Cronos Group Shares Slightly Up After Announcing Purchase Of 10.5% Stake In PharmaCann For $110.4M

Cronos Group Inc. CRON CRON is poised to acquire a stake in PharmaCann for approximately $110.4 million.

Transaction Details: Under the terms of the agreement, a wholly-owned subsidiary of the Toronto-headquartered company has bought an option to obtain a roughly 10.5% ownership stake in PharmaCann on a fully diluted basis.

The option exercise is subject to several factors, such as the federal legalization of cannabis, regulatory approvals in the states where PharmaCann operates, which include New York, Illinois, Ohio, Maryland, Pennsylvania and Massachusetts. Currently, the company runs six production facilities and 23 Verilife dispensaries.

“We were attracted to PharmaCann as an investment because of their disciplined capital allocation, strong track-record, and compelling licensed manufacturing and retail footprint,” commented Kurt Schmidt, president and CEO of Cronos Group, on the company’s strategic investment in PharmaCann.

In addition, both companies agreed to offer other party’s products through their distribution network under commercial agreements.

Once it exercises the option, Cronos Group will enter into an investor rights deal with PharmaCann to gain certain governance rights, including a board seat or board observer and a registration rights agreement that will grant Cronos customary registration rights of PharmaCann common stock.

“Our U.S. growth strategy focuses on delivering long term shareholder value by assembling a best-in-class brand and intellectual property portfolio and positioning to deploy our products in the U.S. market through investments and opportunities with U.S. leaders who share our vision and commitment to responsibly distributing disruptive cannabinoid products that improve people’s lives,” Schmidt added.

Canaccord Genuity Corp. acted as financial advisor to PharmaCann for the transaction while Fox Rothschild LLP served as legal counsel.

The special committee of independent directors of Cronos Group tapped Cowen to serve as a financial advisor. Sullivan & Cromwell LLP and McGuireWoods LLP served as legal advisors to Cronos Group for the transaction.

Price Action: Cronos Group shares were trading 1.07% higher at $9.01 per share at the time of writing.

Photo by Benjamin Brunner on Unsplash