Glass House Brands Closes Acquisitions of Grover Beach Dispensary and Lemoore Natural Healing Center
- All regulatory approvals for the acquisition of Grover Beach and Lemoore Natural Healing Center dispensaries by Glass House Brands have been obtained, and the transaction is officially closed
- Consolidation of the financial results of the Grover Beach and Lemoore dispensaries into the Glass House Brands financial statements will begin, effective immediately
- Glass House aims to reach over US$200 million in revenue over the next 12 months1
LONG BEACH, CA and TORONTO, Sept. 7, 2022 /CNW/ – Glass House Brands Inc. (“Glass House” or the “Company”) (NEO: GLAS.AU) (NEO: GLAS.WT.U) (OTCQX : GLASF) (OTCQX: GHBWF), one of the fastest growing and vertically integrated cannabis companies in the United States, today announced that all local regulatory approvals have been obtained for the acquisition by Glass House of the Natural Healing Center (“NHC”) dispensaries located in Grover Beach and Lemoore, CA, and that transactions are officially closed. The consolidation of the financial results of the Grover Beach and Lemoore stores into the Glass House Brands financial statements will begin immediately.
On May 12, 2022, Glass House announced that it had entered into definitive agreements (the “Agreements”) to acquire 100% equity interests in three retail assets of the Natural Healing Center: two operating retail dispensaries (Lemoore and Morro Bay ) and a retail dispensary (Turlock) scheduled to open in Q4 2022. For more details, please see here. This was followed by the announcement in our second quarter earnings release on August 11, 2022 that Glass House had agreed to acquire the flagship operating dispensary in Grover Beach from the Natural Healing Center for US$15.9 million. , with US$8.1 million of the purchase price in assumed debt, US$7.7. million in stock and US$0.1 million in cash net of working capital (please see here). The Grover Beach store is the crown jewel of NHC’s dispensary portfolio and brought in $16 million in revenue in 2021.2 It is one of only four total dispensaries in Grover Beach and is the #1 taxpayer in town, given its high sales volume and strong cash flow generation.
It is with great pleasure and enthusiasm that I welcome the incredibly talented and hardworking staff of NHC Grover Beach and Lemoore to the Glass House Brands family.
“The Grover Beach and Lemoore dispensaries are the first two NHC dispensaries to be officially integrated, and we expect to complete the acquisition of the Morro Bay store in the third or fourth quarter of 2022, while Turlock3 is expected to close in the fourth quarter of 2022 when the store opens. As we indicated when announcing the execution of definitive agreements for the NHC transaction, this acquisition will further advance us in our goal to become one of the largest retailers in the state of California, adds a additional support for our recently acquired edibles PLUS business (please see here) and provides additional outlets for CPG sales as the SoCal farm continues to ramp up production. Given NHC’s positioning in limited licensing markets and strong customer base, we are excited to add these 4 dispensaries to our retail portfolio. We are now on the verge of a radical transformation in the size of our retail dispensary business. Glass House has the potential to achieve annual sales in excess of US$200 million over the next 12 months,1 compared to the company’s 2021 revenue of US$69 million. The NHC transaction should be immediately accretive to Glass House, both in terms of revenue and EBITDA2.4 base, with all of NHC’s open locations currently generating EBITDA margins above 20%.2.4”
Valnette Garcia, the current CEO of NHC, said: “I am delighted to see the Grover Beach and Lemoore transactions finalized and I look forward to sharing best practices between NHC, Farmacy stores and The Pottery to improve efficiency. operational, amplify purchasing bargaining power and increase profitability, while always providing our customers with a world-class experience and the highest quality cannabis at an affordable price.
Additional details of the NHC transaction:
Upon closing of the acquisition of each NHC dispensary, Glass House will purchase the businesses or assets of such dispensaries and enter into a 5-year arm’s length lease at each location with three 5-year renewal options for a total term up to 20 years.
Closing of the two remaining NHC Dispensary transactions, Morro Bay and Turlock, is subject to approval of the transfer of ownership by local regulators and is further subject to certain closing conditions customary for transactions of this nature, including the approval of the NEO Exchange.
Glass House expects to issue at closing a total of approximately 2.35 million new shares in connection with the closing of the Grover Beach acquisition, and approximately 1.29 million shares in connection with the closing of the acquisition of Lemoore. These shares will all be issued at $4.41 per share, the 25-day VWAP for shares of Glass House Brands trading on the NEO Exchange calculated from May 12, 2022, the date the definitive agreements were signed. A portion of the shares payable to NHC’s vendors will be subject to certain contractual lock-ups and escrow holds and will generally be paid over two years if all shares are released after the lock-up and holdback periods have expired. They are also subject to certain contractual early release triggers.
Footnotes and sources:
1. The company has the potential to make monthly revenues that cancel out up to $200 million. The statement assumes the following in potential incremental revenue from each source: 1) Camarillo (SoCal Farm) Phase I annualized wholesale biomass sales of $50-75 million; 2) The four NHC dispensaries generate annualized revenues of $40 million; 3) The Pottery generates annualized revenues of $3.9 million; 4) PLUS maintains pre-acquisition annualized revenue of $14 million per year; 5) Isla Vista, Santa Ynez, and Eureka dispensaries are open in Q4 2022 and are producing an average of $5 million in annual revenue each; 5) The Company’s core business that existed prior to the addition of these new revenue streams is capable of generating $69 million in revenue.
2. Based on unaudited financial statements prepared by the seller’s management.
3. Calculation and payment of consideration for the acquisition of Turlock will occur at the end of its sixth full quarter of operations, at 6x its annualized EBITDA for that quarter. Consideration will be paid 80% in new shares at the 25-day volume-weighted average (VWAP) price of Glass House shares at the end of this quarter and 20% in the form of a note unsecured promissory note bearing interest at 8% annually and maturing after the fourth anniversary of the closing date.
4. EBITDA is a non-GAAP financial measure comprised of earnings before interest, taxes, depreciation and amortization. This non-GAAP measure is not a standardized financial measure used in the preparation of Glass House’s financial statements in accordance with US GAAP and may not be comparable to similar financial measures disclosed by other companies. EBITDA margin is a non-GAAP ratio of which EBITDA is a component. For further information regarding the use of this non-GAAP financial measure and a reconciliation to the nearest GAAP measure, readers are referred to the section titled “Non-GAAP Financial Measures” in the company’s second quarter 2022 management report available at www. sedar.com, which is incorporated by reference herein.
About Glass House Brands Inc.
Glass House Brands Inc. is one of the fastest growing vertically integrated cannabis companies in the United States, with a particular focus on the California market and building leading, enduring brands to serve consumers in all segments . From its greenhouse operations to its manufacturing practices, from brand building to retail, the company’s efforts are rooted in respect for people, the environment and the community that co-founders Kyle Kazan, President and CEO, and Graham Farrar, Board Member and President, instilled at the start. Through its portfolio of brands, which includes Glass House Farms, PLUS Products, Allswell, Forbidden Flowers and Mama Sue Wellness, Glass House Brands Inc. is committed to achieving its vision of excellence: exceptional cannabis products, produced in a sustainable, for the benefit of all. For more information and company updates, visit www.glasshousebrands.com and https://ir.glasshousebrands.com/contact/email-alerts/.
original press release
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