The Valens Company Inc (TSE:VLNS) (OTCQX:VLNCF) (FRA:7LV) reported that it has agreed to acquire premier edibles manufacturer LYF Food Technologies Inc, based out of Kelowna, British Columbia, in a cash-and-stock transaction valued at C$24.9 million, plus up to an additional C$17.5 million in consideration payable upon the business achieving certain earn-out EBITDA milestones.
Valens said the acquisition is expected to be accretive to the company's EBITDA and diluted EPS in 2021 and, if all of the milestones are met, the transaction represents an around 4.2x multiple on the last milestone achieved.
“LYF has set the standard of what high-quality edibles should be and has developed a diverse and flexible manufacturing platform to play a dominant role in the Canadian edibles market,” Valens CEO Tyler Robson said in a statement.
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He added: “LYF stood out for its product innovation and marketing teams, as well as its broad range of edible products, which will introduce new formats to Canadian consumers that are typically only available in more mature markets.”
“We look forward to further developing our product offering to reach more consumers with high-quality and unique cannabis edibles as this product segment continues to gain in popularity.”
Valens noted that its access to low-cost active ingredients combined with LYF's industry-recognized product IP formulations of more than 100 recipes strengthens the company’s capabilities to produce higher-margin, new-to-market edible formats in a segment with limited product variability, and increased consumer demand.
It added that the acquisition accelerates Valens’ entry into one of the fastest-growing segments of the Cannabis 2.0 and 3.0 markets, as the company is poised to substantially expand edible product portfolio and market share with collective capabilities to produce innovative gummies, chocolates, baked goods and more, creating one of the leading cannabis consumer packaged goods platforms in Canada.
As well, Valens said LYF brings with it a proven management team with significant experience operating and working with major Canadian grocery chains, health and wellness retailers, and pharmacies.
LYF's purpose-built, 10,500 square foot manufacturing facility, meanwhile, is just minutes away from the Valens headquarters and LYF Food Technologies has invested nearly C$10 million into its business to-date.
The transaction is expected to close on or about February 18, 2021.
Contact Sean at sean@proactiveinvestors.com