Golden Leaf Holdings Announces Closing of Transformational Acquisition of Retail Store Chain in Oregon

PORTLAND, Ore., May 19, 2021 (GLOBE NEWSWIRE) -- Golden Leaf Holdings Ltd. (CSE:GLH) (OTCQB:GLDFF) (“Golden Leaf,” “GLH” or the “Company”), operating as Chalice Brands, a premier, consumer-driven cannabis company specializing in retail, production, processing, wholesale and distribution, announces the signing of a definitive agreement today, May 19, and concurrent closing of the purchase of 100% ownership in SMS Ventures, LLC, dba Homegrown Oregon (“Homegrown”), a chain of five retail dispensaries located in Portland, Salem and Albany, Oregon, for total consideration of approximately US$9.75 million or 0.9 times Homegrown’s first quarter 2021 annualized revenue2. The added fact that Homegrown is profitable makes this a highly accretive acquisition for Golden Leaf earnings per share.

Transaction Highlights:

  • Total consideration of US$9.75 million, consisting of a US$6 million cash payment at closing, approximately 37 million common shares of the Company priced at a price of C$0.065, plus a secured promissory note for US$1.75 million carrying interest of 8% interest, payable over 48 months with interest only for the first year, with monthly principal payments to start upon the one-year anniversary of closing. Certain additional amounts may be due based on the market price of the Company's common shares.
  • For the quarter ended March 31, 2021, Homegrown reported unaudited gross revenues of US$2.7 million and Adjusted EBITDA1 of US$368,000.
  • On a pro-forma basis, had Homegrown been included, first quarter 2021 revenues for GLH would have been US$8.2 million with a 47% gross margin and Adjusted EBITDA1 of approximately US$722,000.
  • Homegrown’s first quarter 2021 revenue extrapolates to annualized revenue2 of US$10.8 million or 33% of GLH’s fiscal 2020 revenue and Adjusted EBITDA1 of US$1.5M, before realizing on potential benefits of operational synergies between the two organizations or factoring in GLH organic growth for 2021.
  • Store count in Oregon increases from seven to 12. Homegrown is expected to carry Chalice Brands products by Q4 2021, providing the opportunity to increase gross margins by between 5% and 10% in the newly acquired stores.
  • Total consideration of US$9.75 million represents 0.9 times 2021 Homegrown annualized revenue2 the quarter ended March 31, 2021 and is immediately accretive to GLH. To fund this acquisition, GLH raised C$10.5 million at a valuation of 3.2 times fiscal 2020 revenue.
  • Incremental shareholder value of C$43.0 million or C$0.032 per share at FY 2020 revenue multiples based on post transaction 1,355,125,275 shares outstanding3.

“Management is excited to combine with Homegrown and fully expects to continue its migration to better valuations for shareholders as we continue to execute our acquisition strategy. As part of our West Coast-focused growth strategy, we will continue to seek acquisitions like these to demonstrate that we are good allocators of capital,” noted John Varghese, Executive Chairman. “We will continue to grow our business with positive cash flow from both internal organic revenue growth with stringent cost containment. On the acquisition front, we have a growing funnel of actionable and accretive targets that we are assessing and will pursue in the near term.”

“We have been diligently searching for the appropriate footprint expansion for our retail business in Oregon that represented the right fit and to be in a position to fund the acquisition. Homegrown’s culture aligns perfectly within ours and provides an exceptional geographic compatibility with Chalice and offers an expansion into parts of Oregon in which Chalice does not operate currently. We have the ability to significantly increase vertical margin revenue through the distribution of our existing edibles and extraction manufacturing as well as our own grow,” noted Jeff Yapp, president and CEO of GLH. “Homegrown is a well-run retail operation with a very dedicated team at all five stores that we will continue to rely on as we go forward. The owners of Homegrown have been wonderful to work with during this process and will continue to assist us as we transition and integrate the business. Like GLH, Homegrown holds a deep commitment to prioritizing customer service with exceptional consumer transparency and building long-term relationships with people.”

“The completion of this transaction increases our retail store footprint to 12 locations in the state of Oregon, supported by our own award-winning cultivation operations, our production facilities in Portland and our internal wholesale team covering the state. Chalice has set a target to achieve 5% market share in Oregon while we grow in other markets. Homegrown helps us progress toward that goal,” added Mr. Yapp.

About Golden Leaf Holdings

Golden Leaf Holdings, operating as Chalice Brands, is a premier consumer-driven cannabis company specializing in production, processing, wholesale, distribution and retail, with seven dispensaries in Portland, Oregon. The Company is committed to developing a dynamic portfolio built around the recognized brands of Chalice Farms, with a focus on health and wellness. GLH operates nationally through Fifth and Root and has operations in Oregon and California. Visit http://www.glhmonthly.com for regular updates.

 

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