Heritage Cannabis closes Premium 5 Ltd. acquisition

Combined entity creates a market leader in the extract and extract derivatives market.

TORONTO: Heritage Cannabis Holdings Corp. has completed the acquisition of all of the issued and outstanding securities of Premium 5 Ltd., a news release said.

Premium 5 is a Canada-based recreational and medical cannabis company and market leader in high-quality full spectrum concentrates.

“This transaction delivers on several critical strategic objectives including immediate coast to coast sales and an impressive catalog of products for both the provincial boards and consumers across Canada,” stated Clint Sharples, CEO of Heritage.

“We continue to build out our strong product development pipeline catering to multiple consumer categories and price points, and the addition of Premium 5 will expand our reach and accelerate the growth of our domestic and international platform.”

Heritage Cannabis announces the acquisition of Opticann Inc.

Distribution: Premium 5 products are currently available from retailers in eight provinces, as well as one of the only concentrate brands available nationally to medical patients through both the Shoppers Drug Mart and Shelter Market platforms.

These key relationships with provincial boards will be invaluable in extending market reach for all Heritage products and planned new releases.

Brands: Premium 5 is the first-to-market for several concentrate products in the legal adult cannabis market, and now has the largest concentrate product portfolio in the country with 66 unique SKUs.

With the newly launched RAD brand –a first in the value hydrocarbon concentrate, flower and distillate vape categories –Premium 5 has offerings targeted to the premium, core and value segments. This breadth of portfolio establishes Heritage as a leader in strain-specific and unique, highly sought after cannabis products.

This has also allowed Heritage to potentially leverage these product portfolios in markets outside of Canada.

Financial Synergies: Premium 5 has scaled revenues to an annualized run-rate of approximately $20 million under an asset light model with a small, experienced team.

Heritage will optimize existing capacity to internalize many functions currently outsourced by Premium 5, increasing the EBITDA margin of an already profitable business and moving forward the timeline to positive cash flow generation for Heritage.

Heritage issued 150 million common shares of the Company on closing of the acquisition, the majority of which will be held in escrow by Heritage and released, subject to any reductions related to indemnification claims.

As part of this acquisition, the Company has agreed to pay additional consideration on certain conditional events being met, including obtaining specified revenue targets, while maintaining minimum gross margin objectives over the next 24months. This will allow the Premium 5 shareholders to potentially earn additional consideration of up to CDN $20 million satisfied in the form of Common Shares in the Company (Additional Milestone Common Share Payments).

The Additional Milestone Common Share Payments, when and if paid, will be subject to a statutory four month and one day hold period from the date of issuance. Upon closing of the Premium 5 acquisition, Merida Capital Holdings (MCH), the largest non-insider investor in Premium 5 will become a strategic shareholder in Heritage.

MCH, along with its portfolio companies in the United States, has reached an agreement which will see the two companies partnering on an expansion for Heritage into the US. This partnership will see the Company introducing its brands and products into select states where cannabis is legal.

Heritage Cannabis Holdings Corp. is a cannabinoid company focused on the production and sale of medical and recreational hemp-based and cannabis-based products and services. In Canada, Heritage operates through its subsidiaries Voyage Cannabis Corp. and CannaCure Corp., both regulated under the Cannabis Act Regulations.


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