The Valens Company (TSX:VLNS, OTCQX:VLNCF) Inc has reached a deal to be acquired by SNDL Inc, the largest private sector liquor and cannabis retailer in Canada, for about $138 million, according to a statement.
SNDL's retail banners include Ace Liquor, Wine and Beyond, Liquor Depot, Value Buds, and Spiritleaf. It will acquire all issued and outstanding common shares of Valens, and Valens’ shareholders will receive 0.3334 SNDL common shares for each Valens share. That represents an implied value of $1.26 per Valens share, which is roughly a 10% premium. Valens shareholders will own 9.5% of the combined company.
The combined company will have at its disposal more than 555,500 square feet (sq ft) of cultivation and manufacturing space, along with 185 cannabis stores under the Spiritleaf and Value Buds banners.
READ: The Valens Company posts higher 2Q revenue as Green Roads and B2B sales record double digit growth
The combination of a diverse portfolio of brands, an extensive retail footprint, low-cost biomass sourcing, premium indoor cultivation and low-cost manufacturing facilities creates one of the largest adult-use cannabis manufacturers and retailers, the company said.
By integrating Valens' product suite, SNDL will increase its overall cannabis market share to 4.5% and its 2.0 product formats market share to 5.2%, becoming a top 10 player in both categories.
Additionally, Valens' low-cost platform, allows SNDL to enhance its own product line while offering pricing flexibility to retail partners.
SNDL also has approximately $314 million in net cash and no debt, which gives it one of the strongest balance sheets in the North American regulated cannabis industry. To that end, the combination of SNDL and Valens is expected to deliver more than $10 million of annual cost synergies and an estimated $15 million or more of additional EBITDA on an annual run-rate basis.
"This powerful combination will result in the creation of a dominant vertically integrated company, exceptionally well-suited to weather the current cannabis environment and become a leader in the Canadian regulated products sector," SNDL CEO Zach George said in a statement.
"SNDL's existing consumer packaged cannabis business will be transformed by Valens' high-quality extraction, processing, and manufacturing capabilities and aligns well with our strategic vision to delight consumers with a full range of quality cannabis products and experiences. Our companies have been commercial partners since Canadian legalization. I am excited by the strong cultural fit between our teams and humbled by the opportunity to work with Valens' passionate and innovative leadership."
Meanwhile, Valens said its secured non-revolving term loan has been refinanced and upsized with an additional $14.3 million of incremental capital, thus increasing the principal amount of the loan to $60 million.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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