GrowGeneration continues its buying spree with its 3rd acquisition in Q4 (GRWG)
GrowGeneration, the nation's largest chain of specialty hydroponic and organic garden centers, has announced the signing of an asset purchase agreement to acquire The GrowBiz, the nation’s third-largest chain of hydroponic garden centers, with five stores across California and Oregon. The transaction is expected to close before fiscal year-end 2020. The addition of The GrowBiz is expected to generate annual revenues approaching $50 million. The acquisition will bring the total number of GrowGen hydroponic garden centers in California to ten and Oregon to two.
Excluding this transaction, GrowGen has 31 stores, which include 5 locations in Colorado, 6 locations in California, 2 locations in Nevada, 1 location in Arizona, 1 location in Washington, 6 locations in Michigan, 1 location in Rhode Island, 4 locations in Oklahoma, 1 location in Oregon, 3 locations in Maine and 1 location in Florida.
The company has been on an acquisition spree in Q4. On October 12th, GrowGen announced its acquisition of Hydroponics Depot, Phoenix's largest indoor and outdoor garden center. At the time of the acquisition, the Arizona storefront had year-to-date sales above $5 million and year-over-year growth of 50%. A little over a week later, the company announced its acquisition of Big Green Tomato ("BGT"), a two-store chain in Battle Creek and Taylor, Michigan. BGT has two well-established locations with strong commercial operations and annual revenues approaching $16 million. The company’s portfolio expansion has rapidly and dramatically consolidated its preeminent position within the ancillary cannabis supplier on the eve of significant legislative change on the state level and quite possibly on the federal level as well.
TerrAscend preannounces strong Q3 2020 results (TRSSF)
TerrAscend Corp., a middle-tier U.S. MSO, announced preliminary financial results for its third-quarter ending September 30, 2020. Based on a preliminary (unaudited) review, the company anticipates net sales of C$51.0 million versus FactSet Consensus C$53.1 million, representing 8% QoQ and 90% YoY growth. While the preliminary topline number is under consensus, adjusted EBITDA is expected to be C$17.8 million versus FactSet Consensus C$14.4 million, an increase of 56% QoQ, and a vast improvement from adjusted EBITDA of -C$6.5 million in 3Q19. Adjusted EBITDA margin expanded over 10 percentage points sequentially to 35%.
"We're driving strong revenue growth and margin expansion by focusing on operational excellence, controlled SG&A spending, and strategically allocating our capital to generate the greatest returns and industry-leading EBITDA margins," said Jason Ackerman, CEO and Executive Chairman of TerrAscend. "Leveraging the skills of our of best-in-class operating team, we are focused on rapidly building scale in growing limited license markets."
TerrAscend is an operator that will benefit from an unlocked adult-use market in New Jersey – it holds one of six vertically integrated license holders in the state. TerrAscend has secured a 16-acre site in Boonton Township, Morris County. Construction of a 200,000 sq. ft. production facility is underway. The first phase covers approximately 80,000 sq. ft. of cultivation; processing and support space is expected to be operational before fiscal 2020. Site plans for the second phase have been completed and submitted to the Boonton Township Planning Board for review for an additional approximately 120,000 sq.ft. Their first retail location in Phillipsburg is set to open in November. With New Jersey likely to legalize recreational, the company is poised to become a major player in a market with over 9 million residents.
In Canada, Fire & Flower acquires a leading Ontario cannabis retailer (FFLWF)
Fire & Flower Holdings Corp announced that it has entered into a definitive share purchase agreement to acquire Friendly Stranger Holdings Corp for approximately C$30 million. Upon acquisition close, Fire & Flower is expected to own and operate an additional 11 licensed cannabis retail stores across the province of Ontario, with four more cannabis stores in queue to be licensed and operational by the end of Q4 2020. Upon closing, Fire & Flower is expected to have 66 stores, including 18 in Ontario and an additional 9 stores in the queue for licensing, giving the company the largest footprint in Ontario and Canada.
Despite Canadian LPs having operational difficulties, Canadian adult-use retail sales have been gathering momentum, growing to a record C$244.9 million in August, a 94.4% YoY increase, and a 5.2% MoM increase. August’s sales suggest annualized revenues of C$2.9 billion. The three provinces with the strongest sales were: Ontario, with a 27.3% share of August sales, which grew 10.9% MoM; Alberta, with a 21.5% share of August sales, which grew 1.0% MoM; Quebec, with an 18.2% share of August sales, grew 1.7% MoM.
M&A activity appears to be picking up in the Canadian cannabis retail space. CEO of Fire & Flower, Trevor Fencott, commented in an interview that retail acquisitions in Ontario are likely to continue given the province's licensing hurdles. This acquisition comes after High Tide Inc. and Meta Growth Corp. announced plans to merge, creating the country's biggest pot retailer at the time with 63 stores across the country.
