Adam Jackson
Lucy Scientific Discovery Inc. (NASDAQ: LSDI) agreed to acquire the intellectual property of High Times. The acquisition will grant Lucy a steady flow of income from licensing and royalties linked to High Times, Cannabis Cup, and 420.com brands.
The deal doesn’t come so much as a surprise, as Lucy has close ties with High Times, tethered by a web of familial connections.
A looming deadline to repay a $28 million debt likely also drove the timing of the deal. High Times was given a due date of Sept. 30, to pay the debt to a receiver for the lender, ExWorks.
Financial Details
Under the agreement, Lucy will release 19.9% of its shares to High Times and commit to semiannual payments over the next five years. These payments are based on the profit margins from the acquired IP. Lucy can choose to fulfill this obligation in either shares or cash.
Lucy is also giving High Times back licensing rights to open stores and sell THC products in the U.S. For this, High Times will pay Lucy $1 million a year. If cannabis becomes federally legal, that payment will double.
The deal is expected to be finalized in the next two weeks.
“Lucy expects this acquisition to drive high margin revenue quickly and sustainably across the cannabis sector around the world,” Lucy CEO Richard Nanula said in a statement. “This is a great opportunity to grow the market presence of the nearly 50 year old High Times brand globally through licensing and online distribution.”
High Expectations
Lucy’s acquisition strategy hinges on leveraging the High Times brand rights to maximize profit from both existing and future licensing deals. The company said the “essence” of the acquired brands will remain intact “while identifying new avenues for growth and development.”
Lucy expects the High Times acquisition, with 18 licensing agreements across various product categories, to add a minimum of $10 million in revenue and $5 million in profit by 2024.
“Over the past few years, we have been building the consumer products offerings for High Times and there is no better partner than Lucy to drive our iconic brand forward,” said Adam Levin, High Times’ executive chairman.
“This transaction will open up tremendous new opportunities to grow and expand the High Times brand led by Richard Nanula, who has decades of experience with some of the biggest consumer brands and companies in the world.”
