Planet 13 Holdings Inc (CSE:PLTH, OTCQX:PLNHF) and Next Green Wave Holdings Inc (CSE:NGW, OTCQX:NXGWF) have struck a definitive agreement following which Planet 13 will acquire all the issued and outstanding shares of NGW, by way of a court-approved plan of arrangement for around C$91 million.
“Today's announcement is an extension of the strategy we've laid out for investors of adding cultivation and production in California to vertically integrate and bring our highly popular brands into the state. We are methodically expanding our footprint to drive topline growth and improved profitability," Planet 13 co-CEO and co-founder Bob Groesbeck, said in a statement.
"We've been incredibly impressed by the Next Green Wave (CSE:NGW, OTCQX:NXGWF) team and their ability to generate revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) based on the quality of their cultivation and manufacturing in this very competitive market," he added.
READ: Planet 13 reports higher third-quarter revenue on a strong performance from Las Vegas operations
Under the terms of the agreement, Next Green Wave shareholders will receive 0.1081 of a share of Planet 13 subject to calculations, and $0.0001 in cash, for each NGW share held by them.
Based on Planet 13's 10-day volume-weighted average price (VWAP) and the exchange ratio on December 17, 2021, the implied deal price per NGW share is C$0.465, representing a premium of 52% to the closing price and 44% to the 10-day VWAP of NGW shares on the Canadian Securities Exchange (CSE) as of December 17, 2021.
The company said the exchange ratio is subject to adjustment as follows:
- If the 10-day VWAP of Planet 13 shares on the CSE immediately preceding the second business day prior to the closing of the transaction is below C$5.50 but above C$4.06, then the exchange ratio will be calculated as C$0.4650 divided by the Planet 13 closing price;
- If the Planet 13 closing price is less than or equal to C$4.06, then the exchange ratio shall be 0.1145; and
- If the Planet 13 closing price is greater than or equal to C$5.50, then the exchange ratio shall be 0.0845.
After the transaction, NGW shareholders will own roughly 9.2% of the pro-forma company on a fully diluted basis.
In highlighting the logic for the acquisition, Planet 13 said the deal will be “immediately accretive to 2021 and 2022 EBITDA.” It added that the transaction structure provides “meaningful price protection against market volatility in Planet 13's share price up to the completion of the transaction.”
Planet 13 noted that NGW's operations will serve as the “backbone” of Planet 13's continued focus on the California market. “NGW will enable Planet 13 to introduce their diverse brand portfolio of exotic, pheno-hunted cultivars to the Santa Ana SuperStore as well as across the state,” said the company.
Meanwhile, NGW shareholders will immediately benefit from the “enhanced size, scale and liquidity” of Planet 13's capital market presence. They will also participate fully in Planet 13's upcoming expansions into Illinois and Florida.
Planet 13 will retain NGW's management team, deepening the company's knowledge base and expertise across the California market. Planet 13 said it will benefit from NGW's “cultivation techniques and pheno-hunted cultivars, greatly expanding the pro forma company's cultivation capabilities, product offerings, and proficiency.”
"This is an exciting day for Next Green Wave shareholders. Planet 13 has proven its ability to run incredibly productive retail locations and create manufactured products that command a significant share of sales in their home state of Nevada," said Next Green Wave CEO Mike Jennings. "They are a perfect fit for Next Green Wave and being a part of their attractive growth profile and expansion in Illinois and Florida is the correct next step for NGW."
The transaction has been unanimously approved by the boards of Planet 13 and Next Green Wave.
The agreement contains standard covenants, including termination fees of $3.25 million and $2 million payable by NGW and Planet 13, respectively if the deal is terminated under certain circumstances. In addition, the agreement contains an expense reimbursement fee of up to $1 million payable by NGW to Planet 13 if the transaction is terminated.
The company said the transaction is expected to close in the first quarter of 2022.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive