🌹Greenrose Acquisition Corp. (SPAC) – acquires Four Cannabis Companies, Creating a Cash Flow Positive MSO
Total Initial Transaction Value of $210M, with Maximum Earnout of $110M
|Dai Truong||Mar 16||1|
📉 Greenrose (GNRS) ended the day ⬇️ down 1.2% after announcement with 3.8M shares traded (6.8x average volume for the past month) — either the M&A deals and/or the fundraising disappointed investors (typically PIPE commitments are announced concurrently).
Greenrose Acquisition Corp. (NASDAQ: GNRSU, GNRS, GNRSW) (Greenrose), a special purpose acquisition company (SPAC) 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.
High Growth Limited License & Established Recreational Markets
Greenrose will establish itself in highly profitable, high growth limited license markets such as Arizona, Nevada and the medical market of Connecticut.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.
Strong Revenue Growth, Adjusted EBITDA and Cash Flow Positive
2020E Revenue / Adjusted EBITDA: $83M / $32M (38.6% margin)
2021E Revenue / Adjusted EBITDA: $158M / $56M (35.4% margin)
2022E Revenue / Adjusted EBITDA: $230M / $90M (39.1% margin)
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.
Transaction Terms & Financing
Greenrose will acquire the Platform for ~$210M ($170M cash, $15M stock and $25M debt), representing an attractive 2021 revenue and Adjusted EBITDA multiple of 1.3x and 3.8x, respectively. In addition, a maximum of $110M in earnouts could be paid out through 2024, consisting of $75M in stock and $35M in debt. Greenrose intends to commence an offering of $150M in equity and debt securities in a private offering (PIPE), and to use the net proceeds of such offering for the acquisition of the Platform and general corporate purposes. 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 ~$140M in cash with $75M in debt. Cash available is anticipated to consist of Greenrose’s ~$173M of cash in trust (before any redemptions) and an additional $150M in gross proceeds from the Offering. In connection with the Offering, Greenrose has received a non-binding term sheet for $80M, consisting of $40M debt and $40M equity.
The transactions are expected to close in Q2 or Q3 2021.
Attractive Acquisition Multiples Relative to Comps
Enterprise Value = $296M ($411M Equity + $75M Debt - $189M Cash)
2020E Adjusted EBITDA: $32M (9.3x EV/Adjusted EBITDA)
2021E Adjusted EBITDA: $56M (5.3x EV/Adjusted EBITDA)