Greenrose SPAC Acquires 4 Cannabis Businesses Creating New Vertically Integrated Company

9.1 min readPublished On: March 21st, 2021By

AMITYVILLE, N.Y.– Greenrose Acquisition Corp. (NASDAQ: GNRSU, GNRS, GNRSW) (Greenrose), a special purpose acquisition company targeting companies in the cannabis industry, has entered into definitive agreements to acquire four cannabis companies (The Platform). The companies are Shango Holdings Inc. (Shango), Futureworks LLC (d/b/a The Health Center), Theraplant, LLC, and True Harvest, LLC.

Prior to closing the transaction, Greenrose will be renamed The Greenrose Holding Company Inc. and is expected to transition its listing from the Nasdaq Capital Market to the OTCQX® Best Market. Additionally, Greenrose intends to list on the NEO exchange after the close of the transaction.

Platform Overview by State

STATE FOOTPRINT AND HIGHLIGHTS
Arizona One 74,000 ft² cultivation facility and one processing facility
California One dispensary, one distribution business
Colorado Three dispensaries, three cultivation facilities with 58,500 ft² of total cultivation capacity and one processing facility
Connecticut One 68,000 ft2 combined cultivation, processing, manufacturing and packaging facility under expansion to add another 30,000 ft2; one of four exclusive growers statewide
Michigan Three dispensaries, one 25,000 ft² cultivation facility and two processing facilities
Nevada One dispensary, one 20,000 ft² cultivation facility with room to expand to 50,000 ft² and one processing facility
Oregon One dispensary and an additional dispensary license, two cultivation facilities totaling 10,000 ft² of indoor capacity and 30,000 ft2 of outdoor capacity

Greenrose Investment Highlights

  • Establishes a Footprint in High Growth Limited License Markets. Through these acquisitions, Greenrose will establish itself in highly profitable, high growth limited license markets such as Arizona, Nevada and the medical market of Connecticut.
  • Vertically Integrated Operations in Established Recreational Markets. In the established markets of Colorado, Oregon and California, Greenrose will pursue a high risk adjusted return business strategy of consolidating a group of highly fragmented, profitable markets.
  • Well Capitalized and Cash Flow Positive. Upon closing, the transaction will be immediately Adjusted EBITDA and cash flow positive with ample liquidity to execute Greenrose’s strategic growth objectives.
  • Rapid Growth Profile. The Platform’s estimated pro forma revenue and Adjusted EBITDA1 in 2020 were $83 million and $32 million, respectively, and are projected to grow to $158 million and $56 million in 2021 and $230 million and $90 million in 2022. This represents a 66% and 68% compounded annual growth rate on pro forma revenue and Adjusted EBITDA, respectively.
  • Compelling M&A Pipeline. The cannabis market is enjoying strong growth, but attractively priced assets remain available due to capital constraints and companies with non-core assets. Greenrose intends to identify additional complementary companies and select premier retail assets. Through these and other opportunities, Greenrose seeks to both expand further within the states in which the Platform companies currently operate and enter new states.
  • Comprehensive Management Team. Greenrose will complement the strong team of cultivation, product development and retail managers within the Platform with its own executives, who possess significant corporate-level operational, financial, legal and public company experience.

“The companies we are bringing to market fully align with Greenrose’s core objectives,” said Mickey Harley, CEO and Director of Greenrose. “We are targeting strategic assets in several key states that present opportunities for further consolidation as we seek to deepen our presence, particularly in the West. Additionally, we are entering high growth, limited license markets and newly recreational markets. The Platform provides significant revenue, Adjusted EBITDA and cash flow right out of the gate, which we expect will help us drive our growth strategy.

“Across the Platform, we are targeting acquisitions with the highest quality retail alignment and superior cultivation capabilities, selling the most reputable products in their respective markets at premium prices. On a state-by-state level, we plan to build upon high growth, limited license markets like Nevada, as well as newly recreational and limited license markets like Arizona and Michigan. In emerging medical markets with recreational potential like Connecticut, where our company is generating strong cash flow, we are excited about this growth potential as the market evolves. In established but highly fragmented markets like California, Colorado and Oregon, the goal will be to take advantage of the consolidation opportunities those markets offer, recognizing the favorable risk-reward dynamics of such markets vis-à-vis the newer, limited license markets. We also anticipate evaluating select distressed and undervalued assets.”

Paul Otto Wimer, Greenrose President, commented: “Our collective executive management team has extensive M&A experience and has multi-decade experience in business leadership, operational management and corporate finance. We expect the potential pipeline of longer-term opportunities to expand now that recreational legalization has become more widespread following the 2020 election. As we develop and expand our Platform, we plan to leverage the experience of our combined management team and our scale to accelerate growth.”

Transaction Terms & Financing

Under the terms of the agreement, Greenrose will acquire the Platform for approximately $210 million, consisting of approximately $170 million in cash, $15 million in stock and $25 million in debt, representing an attractive 2021 revenue and Adjusted EBITDA multiple of 1.3x and 3.8x, respectively. In addition, a maximum of $110 million in earnouts could be paid out through 2024, consisting of $75 million in stock and $35 million in debt.

Greenrose intends to commence an offering (the “Offering”) of $150 million in equity and debt securities in a private offering, and to use the net proceeds of such offering for the acquisition of the Platform and general corporate purposes. The interest rate and maturity of any debt securities and the terms of any equity offered will be determined at the time of sale. The Offering will be made only to persons reasonably believed to be accredited or otherwise qualified investors under the Securities Act of 1933, as amended (the “Securities Act”). Any securities sold by Greenrose in the Offering are not expected to be registered under the Securities Act and may not be resold absent registration or unless an exemption from such registration is available. This disclosure is made pursuant to Rule 135c of the Securities Act, and does not constitute an offer to sell securities in the Offering, nor a solicitation for an offer to buy securities in the Offering.

Assuming no redemptions by Greenrose’s public stockholders in connection with the acquisitions, the combined company, post-business combination and post-proposed Offering, will have an estimated $140 million in cash with $75 million in debt. Cash available is anticipated to consist of Greenrose’s approximately $173 million of cash in trust (before any redemptions) and an additional $150 million in gross proceeds from the Offering. In connection with the Offering, Greenrose has received a non-binding term sheet for $80 million, consisting of $40 million debt and $40 million equity.

The net proceeds raised from the transaction will primarily be used to support working capital and fund expansion through additional acquisitions. Giving effect to the anticipated acquisition of the Platform, Greenrose is expected to generate revenue and Adjusted EBITDA of approximately $158 million and $56 million, respectively, in 2021, exclusive of additional M&A activity that Greenrose may undertake.

The board of directors of Greenrose and the governing bodies of each of the Platform companies have unanimously approved the proposed transactions, and they are expected to close in the second or third quarter of 2021, subject to regulatory and stockholder/equity holder approvals, as well as other customary closing conditions.

The tables below provide a synopsis of the assets, offerings and geographic footprint of each of the Platform companies.

Company Key Geography and Assets Highlights
Shango
  • Arizona, California, Michigan, Nevada, Oregon
  • Six dispensaries and one additional Oregon license
  • Four cultivation and three processing facilities
  • Vertically integrated in Michigan with three dispensaries, 25,000 ft2 cultivation facility and two processing facilities
  • Vertically integrated in Nevada with one dispensary, one 20,000 ft2 cultivation facility, with current expansion of an additional 30,000 ft2, and one processing facility all within a 72,000 ft2 facility
  • Vertically integrated in Oregon with one dispensary and two cultivation facilities with 10,000 ft2 of total indoor cultivation capacity and 30,000 ft2 of total outdoor cultivation capacity
  • Agreement to manage True Harvest’s Arizona cultivation operations
  • One dispensary and distribution company in California
The Health Center
  • Colorado
  • Three dispensaries
  • Three cultivation facilities and one processing facility
  • Cultivation assets with total capacity of 58,500 ft2
  • Vertically integrated assets to anchor horizontal consolidation of market
  • Focus on the Denver metro marketplace
  • High-end products at affordable prices
Theraplant
  • Connecticut
  • One combined cultivation, processing, manufacturing and packaging facility
  • One of only four growers in Connecticut
  • High barriers to entry
  • Cultivation facility with 68,000 ft² of current capacity, with additional 30,000 ft2 of capacity under construction
True Harvest
  • Arizona
  • One cultivation facility and one processing facility
  • 74,000 ft² cultivation facility currently under internal expansion to double capacity from 4 to 8 cultivation rooms, run by Shango growers
  • Expands Shango footprint in Arizona
  • Currently under expansion to double capacity
  • Accelerated consumer demand in new recreational market

Advisors
Imperial Capital, LLC is acting as capital markets advisor to Greenrose. Tarter Krinsky & Drogin LLP is acting as legal advisor to Greenrose. Gateway Group is serving as communications advisor to Greenrose.

Forward-Looking Statements
Certain statements made in this release are “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Greenrose’s or the Portfolio’s, control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important factors, among others, that may affect actual results or outcomes include: the inability to obtain Greenrose stockholder approval of the business combinations, the inability to complete the transaction contemplated by each of the respective merger or acquisition agreements because of failure of closing conditions or other reasons; the inability to recognize the anticipated benefits of the proposed business combinations, which may be affected by, among other things, the amount of cash available following any redemptions by Greenrose stockholders; liquidity of Greenrose’s stock once quoted on the OTCQX; costs related to the proposed business combinations; Greenrose’s ability to manage growth; Greenrose’s ability to identify and integrate other future acquisitions; rising costs adversely affecting Greenrose’s profitability; competition in the legal cannabis industry; adverse changes to the legal environment for the cannabis industry; and general economic and market conditions impacting demand for Greenrose’s products and services.  See the risk factors disclosed in the proxy statement for the business combinations for additional risks associated with the business combinations. None of Greenrose, Shango, THC, True Harvest or Theraplant undertakes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Readers should not unduly rely on any estimates, projections or other forward-looking statements or data contained herein.

(This information is primarily sourced from Greenrose.  Highly Capitalized has neither approved nor disapproved the contents of this news release. Read our Disclaimer here)

About the Author: News Team

Newsteam at Highly Capitalized are some of the most experienced writers in cannabis and psychedelics business & finance. We cover capital markets, finance, branding, marketing and everything important in between. Most of all, we follow the money.

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