CALGARY, AB, May 10, 2021 /CNW/ - High Tide Inc.
("High Tide" or the "Company") (TSXV: HITI) (OTCQB:
HITIF) (FRA: 2LY), a retail-focused cannabis corporation enhanced
by the manufacturing and distribution of consumption accessories,
is pleased to announce that it has completed the acquisition (the
"Acquisition") of Fab Nutrition, LLC, operating as FABCBD
("FABCBD") thus meaningfully increasing its presence within
the U.S. e-commerce marketplace for hemp-derived CBD products. The
acquisition is just one of a series of recent steps the Company has
taken to considerably expand its footprint in the United States market by selling products
that are already federally permissible, and demonstrates that High
Tide can drive profitability without having to wait for federal
cannabis legalization.
The Acquisition was completed pursuant to the terms of the
definitive agreement (the "Acquisition Agreement")
previously announced by the Company on May
3, 2021, pursuant to which High Tide has acquired 80%
of FABCBD for US$20.64 Million (the
"Transaction") and has been granted a three-year option to
acquire the remaining 20% of FABCBD at any time.
The consideration for the 80% of FABCBD which is being acquired
by High Tide is comprised of: (i) 15,154,09 common shares of High
Tide ("High Tide Shares") valued at US$8.08 Million (the "Share
Consideration") on the basis of a deemed price per High Tide
Share of $0.648, being equal to the
volume weighted average price per High Tide Share on the TSXV for
the 10 consecutive trading days preceding the closing of the
Transaction ("Closing"); and (ii) US$12.56 Million in cash (collectively with the
Share Consideration, the "Consideration"). The cash portion
of the Transaction has been funded entirely with cash on hand. In
addition, pursuant to the Acquisition Agreement the vendor may be
entitled to an earn out bonus of US$612,000 in the event that FABCBD exceeds gross
revenues of at least US$13,500,000 in
2021, which will be paid, if due, in High Tide Shares based on the
volume weighted average price per High Tide Share for the 10
consecutive trading days preceding payment, subject to a maximum of
1,425,106 High Tide Shares. To date, upon Closing, FABCBD has
approximately US$500,000 of cash and
non-cash working capital and inventory of approximately
US$550,000.
In addition to the foregoing, as per the terms of the
Acquisition Agreement, FABCBD has granted High Tide an option to
acquire all the remaining shares in FABCBD not held by High Tide,
thus allowing High Tide to become the sole shareholder of FABCBD
(the "Call Option"), at an enterprise value equal to the
trailing twelve months of EBITDA multiplied by six. The Call Option
will be exercisable at any time for a period of three (3) years
from Closing. In addition, High Tide has agreed to grant FABCBD's
founder an option to put to High Tide, the remaining shares in
FABCBD not held by High Tide (the "Put Option"), at the same
enterprise value of the Call Option. The Put Option will be
exercisable by FABCBD's founder for a period of two (2) years
following the first anniversary of Closing. The consideration under
the Call Option or the Put Option, if exercised, will be satisfied
in High Tide Shares, on the basis of a deemed price per High Tide
Share equal to the volume weighted average price per High Tide
Share on the TSXV for the 10 consecutive trading days preceding
closing of the Call Option or the Put Option, as the case may
be.
Pursuant to the Acquisition Agreement, 9,679,778 High Tide
Shares, equal to 25% of the Consideration has been placed in escrow
for a period of up to 24 months from Closing, with releases
scheduled every six months.
Bayline Capital Partners Inc. ("Bayline") and KPMG LLP
served as High Tide's advisors in connection with the Transaction.
In connection with the Transaction, the Company has agreed to pay
Bayline, an arm's length party, an advisory fee equal to 3% of the
Consideration, 50% in cash on Closing, and 50% in High Tide Shares,
being 462,711 High Tide Shares.
The High Tide Shares issued for the acquisition of FABCBD and to
Bayline are subject to a statutory hold period of four months and
one day.
Furthermore, High Tide granted 950,000 stock options (the
"Options") to Josh Delaney,
founder and CEO of FABCBD (750,000) and an employee of High Tide
(200,000), exercisable at $0.60 per
High Tide Share for a period of three years.
ABOUT FABCBD
Fab Nutrition, LLC is one of the leading online retailers of
hemp-derived CBD products. The company provides a marketplace with
a wide variety of high-quality products and formulas, affordable
pricing, rapid dependable shipping, and surprisingly personable
customer service. The company's website at www.fabcbd.com.
ABOUT HIGH TIDE
High Tide is a retail-focused cannabis company enhanced by the
manufacturing and distribution of consumption accessories. The
Company is the most profitable Canadian retailer of recreational
cannabis as measured by Adjusted EBIDTA,[1] with 85 current
locations spanning Ontario,
Alberta, Manitoba and Saskatchewan. High Tide's retail segment
features the Canna Cabana, KushBar, Meta Cannabis Co., Meta
Cannabis Supply Co. and NewLeaf Cannabis banners, with additional
locations under development across the country. High Tide has been
serving consumers for over a decade through its numerous
consumption accessory businesses including e-commerce platforms
Grasscity.com, Smoke Cartel and CBDcity.com, and its wholesale
distribution division under Valiant Distribution, including the
licensed entertainment product manufacturer Famous Brandz. High
Tide's strategy as a parent company is to extend and strengthen its
integrated value chain, while providing a complete customer
experience and maximizing shareholder value. Key industry investors
in High Tide include Aphria Inc. (TSX:APHA) (NYSE:APHA) and Aurora
Cannabis Inc. (NYSE:ACB) (TSX:ACB).
Neither the TSXV nor its Regulation Services Provider (as that
term is defined in the policies of the TSXV) accepts responsibility
for the adequacy or accuracy of this release.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information in this news release constitutes
forward-looking statements under applicable securities laws. Any
statements that are contained in this news release that are not
statements of historical fact may be deemed to be forward-looking
statements. Forward-looking statements are often identified by
terms such as "may", "should", "anticipate", "expect", "potential",
"believe", "intend" or the negative of these terms and similar
expressions. Forward-looking statements in this news release
include statements relating to High Tide's intention and ability to
complete the Transaction on the terms and conditions set out in the
Acquisition Agreement; the potential effects of the Transaction on
the business of High Tide, including the expectation that the
Transaction will position High Tide to continue online hemp
product/accessories sales in the United
States should federal legalization occur in the United States; statements regarding the
sale of FABCBD products on High Tide's existing U.S. e-commerce
platforms and the potential sale on its Canadian platforms; and
receipt of all requisite regulatory approval, including from the
TSXV. While High Tide considers these assumptions to be reasonable,
based on information currently available, they may prove to be
incorrect. Readers are cautioned not to place undue reliance on
forward-looking statements.
Forward-looking statements also necessarily involve known and
unknown risks, including, without limitation, risks associated with
general economic conditions; adverse industry events; marketing
costs; loss of markets; future legislative and regulatory
developments involving the retail cannabis markets; inability to
access sufficient capital from internal and external sources,
and/or inability to access sufficient capital on favourable terms;
the retail cannabis industries generally; income tax and regulatory
matters; the ability of High Tide to implement its business
strategy; competition; currency and interest rate fluctuations; the
COVID-19 pandemic nationally and globally and the response of
governments to the COVID-19 pandemic in respect of the operation of
retail stores and other risks. Readers are cautioned not to
place undue reliance on forward-looking statements as there can be
no assurance that the plans, intentions or expectations upon which
they are placed will occur. Readers are further cautioned that the
assumptions used in the preparation of such forward-looking
statements (including, but not limited to, the assumption that (i)
High Tide's financial condition and development plans do not change
as a result of unforeseen events, (ii) there will continue to be a
demand, and market opportunity, for High Tide's product offerings,
(ii) current and future economic conditions will neither affect the
business and operations of High Tide nor High Tide's ability to
capitalize on anticipated business opportunities), although
considered reasonable by management of High Tide at the time of
preparation, may prove to be imprecise and result in actual results
differing materially from those anticipated, and as such, undue
reliance should not be placed on forward-looking
statements.
Forward-looking statements, forward-looking financial
information and other metrics presented herein are not intended as
guidance or projections for the periods referenced herein or any
future periods, and in particular, past performance is not an
indicator of future results and the results of High Tide in this
press release may not be indicative of, and are not an estimate,
forecast or projection of High Tide's future results.
Forward-looking statements contained in this news release are
expressly qualified by this cautionary statement and reflect our
expectations as of the date hereof, and thus are subject to change
thereafter. High Tide disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by law. Factors that could cause anticipated opportunities
and actual results to differ materially include, but are not
limited to, matters referred to above and elsewhere in High Tide's
public filings and material change reports, which are and will be
available on SEDAR.
This news release does not constitute an offer to sell or
a solicitation of an offer to buy any of the securities in
the United States of America. The
securities have not been and will not be registered under the
United States Securities Act of 1933 (the "1933 Act") or any state
securities laws and may not be offered or sold within the United States or to U.S. Persons (as
defined in the 1933 Act) unless registered under the 1933 Act and
applicable state securities laws, or an exemption from such
registration is available.
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Adjusted EBITDA is a
non-IFRS financial measure.
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SOURCE High Tide Inc.