Ayr Wellness To Buy PA Natural Medicine For $80M, Announces Accelerated Expiry Of Warrants

Ayr Wellness Inc. AYR AYRWF revealed Wednesday it has signed a binding letter of intent to acquire PA Natural Medicine, LLC, an operator of three licensed retail dispensaries, deepening Ayr’s presence in the Pennsylvania medical market. The total consideration for the purchase amounts to $80 million in stock and cash.

The news comes on the heels of the cannabis company’s announcement of the accelerated expiry of the company’s share purchase warrants.

The Miami, Florida-based Ayr plans to buy 100% of the membership interests of PA Natural. The terms of the transaction include upfront consideration of $80 million, made up of $20 million in stock, $25 million in seller notes and $35 million in cash. An earn-out of up to $40 million, based on 2021 EBITDA hurdles, is payable in Q1 2022 and includes a maximum additional cash payment of $10 million with the remainder paid in stock and notes.

PA Naturals has locations in the college towns of Bloomsburg and State College, as well as Selinsgrove, PA and operates under the retail banner “Nature’s Medicine”.

The acquisition is expected to close in Q4 2021. The company expects to rebrand the dispensaries under the AYR Wellness banner shortly after closing.

“Our goal across our footprint is to develop scale and meaningful presence in each of our markets,” said Jonathan Sandelman, Ayr Wellness founder, chairman and CEO stated. "Today’s announcement builds on our already strong position in Pennsylvania, where we have built a tremendous foundation since entering the state just a few months ago. Our three Ayr Wellness stores, open an average of less than six months, are run-rating at over $7 million in annualized revenue per dispensary and our cultivation facilities are producing some of the best-reviewed flower in the state,”

Early Expiry of All Remaining Warrants And Incentive Exercise Rights

The vertically-integrated multi-state cannabis operator provided notice on Tuesday of the accelerated expiry of the company’s share purchase warrants. The expiry of the warrants is being accelerated as permitted under the warrant agency agreement dated December 21, 2017 between Ayr Wellness and Odyssey Trust Company, as warrant agent as amended. On notice in accordance with the applicable provisions of the Warrant Agency Agreement, the expiry date of the Warrants is now 5:00 p.m. (Toronto time) on September 30, 2021.

In addition, Ayr announced incentive exercise rights available to the holders of the warrants who exercise their warrants for cash. Ayr will be offering a CA$0.75 incentive for the cash-only exercise of the issued and outstanding warrants, which would result in gross proceeds to the company of approximately US$55 million if all of the approximately 6.5 million issued and outstanding Warrants, other than the approximately 2.9 million founders’ warrants, are exercised thereunder.