The Valens Company Inc (TSX:VLNS) (OTCQX:VLNCF) said it has reached a definitive agreement to acquire CBD company Green Roads and its majority-owned manufacturing subsidiary in a cash and share transaction worth US$40 million, plus up to US$20 million more in milestone payments.
The move provides Valens with immediate entry into the US market with a leading CBD health and wellness brand that has an established manufacturing and distribution platform, the company said.
Green Roads, based in south Florida, is the largest privately-owned CBD company in the US. The company produces an award-winning lineup of health and wellness products using hemp-derived CBD, including hemp flower coffee and line of functional gummies that target sleep, stress, and immune support. Valens plans to introduce Green Roads' formulations to the Canadian market.
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"After analyzing over a hundred companies across the US CBD market, we clearly recognized the value in the Green Roads platform with its best-selling brand,” Valens CEO Tyler Robson said in a statement. “Our complementary businesses, culturally aligned teams, and shared 'it's personal' mission to provide consumers with high quality, innovative cannabis products led to an undeniable combination that we believe will disrupt the industry ... Together, The Valens Company and Green Roads make a formidable team, and the combined entity will be primed for significant growth as the global market develops."
Green Roads boasts an extensive distribution network of more than 7,000 retail stores along with an eCommerce and marketing platform with more than 30,000 five-star reviews, the company said. Green Roads is also currently one of a small number of US CBD companies that produce their products in their own cGMP facilities, a testament to their dedication to integrity and excellence.
"Since its inception, Green Roads has led the US CBD industry with a people-first philosophy, producing what we view as the highest quality products while putting consumer protection and education at the forefront,” Green Roads COO Dale Baker said. “With this transaction, we are able to further this mission and grow our community by reaching new markets, consumers and partners both north of the border and globally with one of the most trusted leaders in the cannabis consumer packaged goods manufacturing space."
The Green Roads deal is just the beginning of Valens’ US ambitions, CEO Robson said. With increased American exposure, Valens plans to expand its partnership network and actively pursue complementary business lines, with the ultimate goal of finding a pathway to enter the legal cannabis market if and when permissible by US federal law.
Specifically, the US$40 million deal includes the issuance of US$25.4 million in Valens shares. Future milestone payments could be made in cash or stock. On a pro forma basis, the combination of Valens and Green Roads creates a company that would have generated total revenue of C$111.6M in 2020, the company said.
The combined company's US distribution capabilities are expected to grow as consumer acceptance of CBD for wellness increases with additional FDA guidance and as incoming larger players add legitimacy to the sector, Valens said. The idea will be to replicate Green Roads' brand success in the Canadian market as it begins manufacturing and distributing these branded products across its newly strengthened domestic distribution network.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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