HAVN Life Sciences (CSE: HAVN) (OTC: HAVLF) today announced a Definitive Agreement to acquire all of the outstanding securities of Spore Life Sciences Inc. Toronto-based Spore Life Sciences Inc. is a leading wellness brand focused on functional mushrooms, with a U.S. consumer base of 110,000 customers, nearly 40,000 subscribers, and year-to-date revenues of nearly $8 million CAD (as of the end of November 2021), with recent sales at a run rate of more than $1 million USD per month.
“With this Definitive Agreement, HAVN Life is looking to strengthen its position as a leader in brain health focused nutritional supplements,” says HAVN Life CEO Tim Moore. “Upon completion of the Acquisition, we will add these high-quality formulations to the HAVN Life natural health product portfolio,” he adds.
The Acquisition will bring in nine additional formulations under the HAVN Life retail brand, adding to HAVN’s growing selection of natural health products.
“We are very excited about this potential partnership and believe that HAVN Life’s strong leadership team in the psychedelic space, its experience with natural health products, and network in retail are extremely complementary to our business,” says Spore CEO, Michael Zavet. “We are also excited to support HAVN’s psychedelic endeavours through our digital marketing channels and large customer base,” he adds.
What Spore Brings to the Table
This acquisition gives HAVN Life significant revenue immediately and makes them a major player in the U.S. functional foods market overnight. Functional food demand is growing at a rate of 8% per year and is the fastest growing category within the larger supplements category which is only growing 3% per year.
HAVN picks up Spore’s customer base and distribution with Spore products already featured on Amazon.com. If HAVN Life can leverage Spore’s web presence with their existing products, this would greatly speed up their time-to-market and access to a massive marketplace. In addition, Spore Life joins HAVN as a profitable company, with a gross profit margin of 70% compared with HAVN Life at 43%.
Expansion into the U.S.
HAVN Life acquired a substantial business in Spore, with many opportunities for synergies in manufacturing, distribution, product line expansion, etc. As part of a functional mushroom retail strategy through HAVN Retail, they now have a substantial and growing footprint throughout North America.
The fact that Spore management and other insiders were willing to lock up shares from the deal for as long as 2 years, an abnormally long time for most lockup agreements, show that management has strong confidence in the growth and profit potential of the combined companies. The lockup cements the commitment by both parties to the success of the new entity and additional earnout agreements potentially provide handsome rewards for revenue growth and market share gains that will benefit all parties, including shareholders.
The earnouts in particular may look large on the surface, $30 million USD, paid in either cash or shares if all revenue milestones are hit, however, if HAVN hits those milestones revenue will be up 5x and the revenue multiple current investors are paying for HAVN will be 66% lower than today (including new shares that would need to be added).
The revenue milestones would see HAVN’s revenue grow from $20 million post deal to more than $100 million in 2.5 years, a 90% annual growth rate.
HAVN has found a deal that achieves multiple objectives all at once, speed to market, market expansion and less time to reach profitability to name a few and is now in a much better position to execute on the company’s vision of becoming the leading functional mushroom supplier in North America.
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