12 Sep Medicine Man Technologies – Company on an Acquisition Spree to Establish a Strong Retail Footprint
Medicine Man Technologies (OTCQX: MDCL), a company providing cannabis consulting, nutrients and supplies, announced that it has entered into a binding term sheet agreement with Starbuds, to purchase four dispensaries in Colorado, in consideration for a cash, stock and a deferred payment deal. These four dispensaries are estimated to have EBITDA margins of 35 percent in 2019, making them the most profitable locations in the company’s portfolio, when the deal goes through. With this acquisition, the company now has a total of 27 dispensaries in Colorado.
The deal consists of a payout of $25,048,206.50 in cash, the issuance of 4,202,720 shares of its common stock at a price of $2.98 per share, and a deferred cash payment of $12,524,103.25 to be made 12 months following the initial closing date as per a company statement.
Andy Williams, Co-Founder and Chief Executive Officer of Medicine Man Technologies states
“With an estimated 35% EBITDA margin, these retail stores are collectively expected to be some of the most profitable in our portfolio. We seek acquisition targets that meet strict operational and financial criteria, such as having a seasoned management team, commitment to high quality products and services, and strong revenue growth. Our new partners are aligned with our overall strategic objectives and will help accelerate our drive towards profitable growth, allowing us to compete and thrive in the rapidly changing cannabis industry”.
These dispensaries are located in Denver, Aurora, Peublo West and Mountain View, with another location currently being under construction. This adds to the count of its existing 4 storefronts in Colorado, taking the total retail footprint to eight stores. The company is using the opportunity presented by a change in the Colorado law, which now allows for participation by outsiders in the state’s marijuana enterprise.
This deal is in continuation of an acquisition spree by the company, which signed a similar agreement in June 2019, the terms of which remain undisclosed, to acquire Los Sueños Farms, a cannabis cultivator and MesaPur, the owner of Purplebee’s and a dispensary and infused products company.
Medicine Man Technologies, (OTCQX: MDCL)
Market Cap: $122.54M; Current Share Price: 3.89 USD
Data by YCharts
The Global legal marijuana market is likely to reach over USD 66.3 billion by the end of 2025, as per a report by Grand View Research, Inc, growing at a CAGR of 23.9%. There is a growing acceptance of the curative effects of cannabis, with some countries such as Canada and certain states of U.S legalizing the use of Marijuana for medical and recreational use. Research has time and again shown that cannabinoids (CBD), extracted from the cannabis plant, have varied medical uses with minimal side effects, making it a sought after alternative to traditional pharmaceutical options.
The U.S, where the use of cannabis has only been legalized in 33 states for medical use and 11 states for recreational use, is one of the largest untapped markets for Marijuana, with an estimated value of over USD 11.9 billion in 2018, which is likely to grow at a CAGR of 24.1% from 2019 to 2025.
Currently 33 states in the U.S along with Washington, D.C. have legalized medical marijuana while 10 states (plus D.C.) permit recreational cannabis. 2018 was a great year for CDB industry, not only was the Farm Bill passed that allowed for the sale of hemp and hemp-based cannabidiol products, but the FDA also approved its very first cannabis-derived drug Epidiolex for treatment of seizures.
The call for reform for legalizing marijuana at the federal level is gaining momentum with research proving time and again the many benefits of cannabinoids in treatment of various physical and neurological conditions. There is a growing acceptance of cannabis as pointed out by a survey by Gallup in October 2018, which saw two out of three adults now favor legalizing weed nationally
This offers a great opportunity for multistate, vertically integrated dispensary operators who hold extensive licenses across multiple states. There have been series of mergers and acquisitions in the Cannabis space, which have seen consolidation of major players such as Aurora Cannabis, Canopy Growth, Curaleaf etc, in the anticipation of legalization of marijuana in the U.S by the end of 2019, with a view to increase their retail presence and expand their operations.
According to an estimate by BDS Analytics, medical and retail dispensaries together contributed to over $10.5 billion in cannabis spending in 2018. Dispensaries also provide a source of employment to about 121,000 full-time, and 50,000 indirect full-time workers, being engaged by the industry in 2018. The sector is likely to provide employment to an estimated 291,500 direct full-time employees by 2021.
These figures point to the fact that Marijuana Dispensaries are now an integral part of the blooming global marijuana market and will experience exponential growth in the coming years.
Medicine Man Technologies offers cannabis consulting and turn–key solutions, ranging from assistance, securing a state-issued operating license, to offering cutting-edge low risk cultivation technology, including standard operating procedures and hands-on training. The company operates state-of-the-art dispensaries that provide customers with access to premium quality safe products for medicinal and recreational use. The company also offers standard operating procedures for dispensary facilities such as staffing and personnel training as well.
The company has ties with industry leading extraction companies such as Dixie Elixirs, Medically Correct, CanCore Concepts, and Tree Frog to name a few, who offer license service and formulation support. It offers a 360 degree approach to Cannabis, by addressing the needs in licensing and application support, dispensary operations, facility design and implementation support, consulting, cultivation support and provision of nutrients.
Medicine Man also owns a indoor gardening supplies brand named the big tomato and the ground breaking grow book by Joshua Haupt named “Three a Light”. In addition it also runs a nutrient supply brand namely “Success”.
The company is on a rapid expansion spree, acquiring cannabis operator Roots Rx for $15 million in cash and stock in September 2019. Roots has six dispensaries in Colorado ski mountains and an outdoor cultivation facility near Aspen. The acquisition of Los Sueños Farms and MesaPur will increase Medicine Man’s
“footprint and expand its operations in cultivation, extraction, production and sales, advancing its plan to become a fully vertically integrated operator.”, as per a company statement.
Furthermore, since the start of 2019, the company has been pursuing numerous acquisitions, some of which are pending, such as Colorado Harvest Company, Starbuds, Los Sueños, PurpleBees, MedPharm, Medicine Man Denver, and Green Equity SAS to name a few. This will take its dispensary count to 23, upon successful closing of the acquisitions.
Andy Williams, Co-Founder and Chief Executive Officer of Medicine Man Technologies opines
“We’ve been regionally focused on plans to increase our retail capacity and expand our presence, and this move is consistent with our intention to vertically integrate our grow, manufacturing, and state-wide retail facilities”
The company is leaving no stone unturned to establish a strong retail footprint and capitalize on a booming market for cannabis related medicinal and recreational products.
- The US Retail Marijuana sales are likely to reach $30 billion by 2023, according to an estimate by Marijuana Business Factbook. This presents a massive opportunity for growth and expansion to vertically integrated cannabis companies, which have a strong retail footprint. Medicine Man Technologies realizes the opportunity and is going all out to make strategic acquisitions that will help establish a solid presence in the Colorado retail market.
- The company is helmed by a dynamic and experienced management team that is growth-oriented. It is also adding to its managerial wealth, by sourcing top-notch talent from its acquisitions. This would help the company navigate any likely changes in regulatory and statutory framework with confidence.
- The company has built multiple revenue streams from cultivation, consulting, retail channels and subsidiaries such as the big tomato and success nutrients, which not only help mitigate its risk but also help capitalize on opportunities in multiple areas related with cannabis.
- The Cannabis Industry is governed by stringent regulations and is fraught with uncertainty, the company will have to be prepared to adapt to any changes in policies or capitalize on new opportunities that may arise in the future.
We believe that Medicine Man Technologies is making strategic acquisitions that will drive growth and revenue in the future. A mission-oriented management team, diverse business interests and operations and a plethora of strategic acquisitions, make this company one to watch out for in the Cannabis space.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any position within the next 72 hours.
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