The Ontario-based firm paid US$73.7 million in cash and threw in more than 7.3 million TerrAscend common shares to complete the deal. That represented a total investment of US$118.4 million in The Apothecarium, which has three dispensaries in San Francisco and another in Las Vegas.
The dispensaries sell recreational and medicinal cannabis and the agreement represented a first foray into U.S. retail for TerrAscend, which also has an ecommerce arm called Solace Health. It now aims to become one of the leading multi-state operators in the U.S., while also developing into a global cannabinoid company.
It has issued first-time full year 2019 revenue guidance and it anticipates it will bring in C$135 million, which would represent a significant increase on the C$6.6 million it reported for 2018.
It expects to close the deal for The Apothecarium before the end of June 2019, and it said this would make a significant contribution to its rise in revenue. The company is also planning to open new Apothecarium outlets in Berkeley, California, and Philipsburg, New Jersey before the end of the year.
“We are seeing the results of the foundation we laid in 2018,” said president Matthew Johnson, who was appointed towards the end of the year. “Our team is focused on operational excellence in our facilities across North America, continuing to procure new licenses across the US through greenfield license applications and strategic acquisitions of existing operations.”
TerrAscend has a 67,300 sq. ft. facility in Mississauga and its brands include Haven St. and Knüba Naturals. It is expanding capacity there this year, but it is only likely to stand at around 6,000 kg per year, making it a small producer compared to many of its peers.
Yet it expects GMP certification to be granted “in the coming weeks” and it will then begin exporting to Germany and other international markets. It has signed a deal with extraction firm Medipharm Labs and that will provide it with bulk resin and oil to sell as medicinal brands.
However, the bulk of its revenue is projected to come from The Apothecarium. It has combined revenues of slightly more than US$45 million in 2018 and the business has won awards for its retailing flair.
Co-founder and chief executive Ryan Hudson agreed to stay on and run that side of the business, and the existing team is expected to remain in place. Hudson has promised that customers will not see major changes, as products and prices will remain steady.
Stock Performing Well
Hudson said that he is excited to open new stores under the Apothecarium brand, and the TerrAscend team did well to secure a license for New Jersey. It was one of just six companies to receive a license to operate in the Garden State, and it was the highest scoring out of 146 applicants. It is building 80,000 sq. ft. of cultivation space and 40,000 sq. ft. of processing space on a 16-acre campus in New Jersey to become a vertically integrated player in the state.
TerrAscend shares have performed well this year, increasing from C$5.82 at the beginning of 2019 to $8.00 on Tuesday, Apr. 16. The price shot up on Apr. 12, going from $7.10 to $7.85, despite no news apart from a pedestrian release about Johnson presenting at an upcoming GMP Securities cannabis conference.
It was back down at $7.65 when trading closed on Monday, Apr. 15, but it opened at C$7.85 on Tuesday after its 2019 forecasts were revealed and then hit $8.00 by 9.35 a.m. Its market cap has doubled in the past year and it now stands at around C$735 million.
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