4Front Ventures Buys Massachusetts-Based Marijuana Grower NECC For $55M

Multi-state cannabis operator 4Front Ventures Corp. FFNT FFNTF will buy New England Cannabis Corporation, a marijuana cultivator based in Holliston, Massachusetts for total consideration of $55 million.  The Phoenix, Arizona-based confirmed Thursday that it has signed a definitive agreement for the acquisition.

The Deal Highlights

Upon closing, the transaction is expected to be significantly accretive to the Company's EBITDA expectations for 2022 and will immediately scale 4Front's presence as a dominant wholesaler and producer in the State.

NECC's fully operational 55,000 sq. ft. licensed cultivation facility strengthens 4Front's expanding footprint in this important limited-license state. The transaction will more than double 4Front's total flower canopy in Massachusetts to over 30,000 sq. ft, with further expansion potential for up to an additional 10,000 sq. ft. of canopy, and will approximately triple 4Front's kitchen, processing and distribution space.

The Transaction Details

The purchase price will be funded through the issuance to the seller of 25 million subordinate voting shares of the company and $25 million in cash. The cash portion will be funded through proceeds raised from a $15 million convertible notes offering, led by Navy Capital, a vendor take-back note and balance sheet cash.

The convertible notes have a maturity date of 36 months following their date of issuance and bear interest at a rate of 6.0% per annum, payable annually. Investors can elect at any time to convert their outstanding balance into SVS at a conversion price equal to $1.03.

"The acquisition of New England Cannabis reinforces our core thesis of bringing scaled, low-cost production and operational depth to attractive, nascent, adult-use cannabis markets" said Leo Gontmakher, CEO of 4Front. "The addition of NECC's impressive operations will increase our canopy, kitchen capacity, and add to our extraction capabilities overnight, greatly bolstering our position in the Massachusetts market to become a leading wholesaler of our full suite of products and brands."

Fort Capital Partners acted as sole financial advisor to 4Front on the transaction. Evmarc Advisors acted as financial advisor to NECC on the Transaction.

Price Action

4Front’s shares were trading 1.98% higher at $1.03 per share at the time of writing Thursday morning.

Photo: Courtesy of CRYSTALWEED cannabis on Unsplash