Debra Borchardt
Jushi Holdings Inc. (OTCQX: JUSHF) is planning on buying Vireo Health’s (OTC:VREOF) Pennsylvania Medical Solutions, LLC as the company looks to strengthen its position in the state’s market. Jushi will pay Vireo $16.3 million in cash, a $3.8 million seller note, and assume a $17 million facility associated with a long-term lease obligation. The $37 million deal is expected to close by the end of August 20.
“This acquisition allows Jushi to expand its presence in one of the most attractive medical cannabis markets in the country,” said Jim Cacioppo, Chairman and Chief Executive Officer of Jushi. “Upon completion, Jushi will be able to provide high-quality, indoor flower and concentrates to our Pennsylvania patients who continue to experience constrained supply and high prices. Furthermore, we will be well-positioned to support an increase in demand and maintain the ability to further scale up the facility if required.”
The acquisition operates a 90,000 sq. ft. facility with approximately 45,000 sq. ft. of high-quality, indoor cultivation when construction is complete. The property can also accommodate an additional 25,000 sq. ft. of indoor cultivation bringing the total to 70,000 sq. ft.
Pennsylvania has quickly shown its power in the cannabis industry with total sales of $524 million and 80 operational dispensaries. So far $215 million has been purchased by dispensaries from grower-processors and $309 million made by patients and caregivers at licensed dispensaries. Jushi says is has reaffirmed its revenue guidance for 2021 in the range of $200 and $250 million.
“This transaction secures Vireo’s capital position for the foreseeable future and will enable us to comfortably execute our fiscal year 2020 operating strategy and begin generating positive cash flow in the first half of next year without requiring any additional capital infusions,” said Founder & Chief Executive Officer, Kyle Kingsley, M.D. Vireo said the money received from the sale will help it to increase scale in its core markets of New York, Minnesota, Maryland, Arizona, and New Mexico. Vireo said that these projects are expected to significantly improve its near-term revenue and profitability outlook.
In addition to buying Pennsylvania Medical Solution, Jushi will have an option to buy Pennsylvania Dispensary Solutions, a Pennsylvania medical marijuana dispensary permittee in the Commonwealth’s Northeast region. PADS currently operates two medical marijuana dispensaries in Scranton and Bethlehem, with the right to operate one additional dispensary in the region. The option expires 18 months from the closing of the Agreement.
Financing
In order to help come up with the cash portion of the acquisition, Jushi announced it had received binding subscriptions totaling approximately $15.25 million for the issuance of 10% senior secured notes and warrants to acquire the subordinate voting share of which $12.35 million has been received. The company also said it received non-binding indications of interest for up to an additional $10 million of financing. Jushi said it plans to use $15 million of the proceeds to fund the cash portion of the acquisition.
Jushi Chairman & CEO Jim Cacioppo subscribed for $1.5 million of the Notes with other insiders subscribing for $3.35 million of the Notes.
