Consolidation Continues To Be A Key Trend In The Cannabis Sector

Consolidation continues to be an important theme in the cannabis industry and we want to discuss the topic after SNDL Inc. (Nasdaq: SNDL) completed the previously announced acquisition of The Valens Company Inc. (TSX: VLNS) (Nasdaq: VLNS).

The cost of the acquisition was approximately $138 million (as calculated by using an implied value of $1.26 per share for Valens) which consists of common shares of SNDL and the assumption of Valens’ $60 million non-revolving term loan facility.

According to the press release, the combined company will have approximately $262.5 million of net cash and no debt (the total amount of cash is inclusive of SNDL and Valens cash, net of debt retirement from the transaction and estimated transaction costs as at January 16, 2023).

Valens is a Canadian Licensed Producer (LP) that has been highly focused on cannabis product processing and owns a diverse manufacturing platform. The company operates a multi-facility production platform with two co-located sites, an edibles-focused facility (acquired through Lyf Foods), a cannabidiol (CBD) production asset in Florida, and more.

The acquisition provides SNDL with additional exposure to the cannabis 2.0 vertical in Canada by leveraging Valen’s low-cost processing capability. We believe the acquisition will also allow SNDL to access a low-cost biomass sourcing network that should support the expansion of the entire business.

From cannabis retail operations in Canada to a CBD business in the United States (US), SNDL owns a portfolio of strategic cannabis assets. Going forward, we expect the management team to find synergies from the Valens transaction and will monitor how the story evolves from here.

Although we prefer other Canadian LPs to SNDL, we expect the transaction to be immediately accretive. Over the next year, we expect SNDL to report high profit margins and for the combined company to benefit from the unique capabilities of each operator.

If you are interested in learning more about SNDL, please send an email to support@technical420.com with the subject “SNDL” to be added to our distribution list.

Company Relationship Disclosure

T420 is responsible for the T420 opinions provided in this disclosure except all sources or information provided by other parties were not verified or authenticated and T420 does not undertake to confirm or substantiate or be responsible for such information provided by other parties.

Any Content posted regarding a Profiled Issuer is not a solicitation or recommendation to buy, sell or hold securities. We cannot and do not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. All information should be independently verified. We are not responsible for errors or omissions in our publications, and any opinions expressed are subject to change, without notice. We do not, nor are we under any obligation to undertake due diligence or investigation or authenticate and verify whatsoever regarding Profiled Issuers or any Content posted in relation thereto and we do not receive any verification from the Profiled Issuer regarding the Content we disseminate. Similarly, while we endeavor to facilitate the provision of quality information, we are not responsible for any loss or damages caused or alleged to have been caused by its use nor verify or authenticate or update such information.

This article contains forward-looking statements within the meaning of applicable securities laws. All statements that are not historical facts, including without limitation, statements regarding future estimates, plans, programs, forecasts, projections, objectives, assumptions, expectations or beliefs regarding future performance are “forward-looking statements”. Forward-looking statements can be identified by the use of words such as “expects”, “does not expect”, “is expected”, “believes”, “intends”, “anticipates”, “does not anticipate”, “believes” or variations of these words, expressions or statements, that certain actions, events or results “may”, “could”, “would”, “might” or “will be” taken, will occur or will be realized. Such forward-looking statements involve risks, uncertainties and other known and unknown factors that could cause actual results, events or developments to differ materially from the results, events or developments expected and expressed or implied in such forward-looking statements. These risks and uncertainties include, but are not limited to, dependence on obtaining and maintaining regulatory approvals, including the acquisition and renewal of federal, provincial, state, municipal, local or other licenses, and any inability to obtain all necessary government authorizations, licenses and permits to operate and expand the Company’s facilities; regulatory or policy changes such as changes in applicable laws and regulations, including federal, state and provincial legalization, due to fluctuations in public opinion, industry perception of integrative mental health, including the use of psychedelic-assisted therapy, delays or inefficiencies or any other reason; any other factor or development likely to hamper the growth of the market; the Company’s limited operating and profitability track record; dependence on management; the Company’s need for additional financing and the effects of financial market conditions and other factors on the availability of capital; competition, including that of more established and better funded competitors; the impact of the Russia-Ukraine conflict on the global economy; the continued impact of the COVID-19 pandemic; and the need to build and maintain alliances and partnerships, including with research and development companies, customers and suppliers. These factors should be carefully considered, and readers are cautioned not to place undue reliance on forward-looking statements. Despite the Company’s efforts to identify the main risk factors that could cause actual measures, events or results to differ materially from those described in forward-looking statements, other risk factors may cause measures, events or developments to materially differ from those anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in forward-looking statements. The Company does not undertake to revise forward-looking statements, even if new information becomes available as a result of future events, new facts or any other reason, except as required by applicable laws

Share

Tags

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

Top Stories