TerrAscend signs $118 million purchase agreement for American cannabis brand The Apothecarium
TerrAscend Corp. (CSE: TER; OTCQX: TRSSF) dove headfirst into cannabis retail this week. The Canadian biopharmaceutical company signed definitive purchase agreements with The Apothecarium, a well-known dispensary and cannabis brand based in California. TerrAscend will pay $73 million in cash for the company, with the remainder of the purchase covered by the company’s shares.
TerrAscend has been trading steadily around $6 over the past few days, putting the possible price of this transaction over $118 million. For perspective, the total revenue of Apothecarium’s operations came in at just over $45 million last year.
The pot stock recently procured a credit facility in December that would give them the necessary capital to expand their opportunities in the United States. The purchase of Apothecarium is right in line with TerrAscend’s plans for North America.
“Their strong management team brings best-in-class cultivation, distribution, retail, branding, design, and regulatory expertise, which are well aligned with… TerrAscend's existing strategy and operations,” TerrAscend President Matthew Johnson clarified in Monday’s press release. “We believe The Apothecarium is the model for operational excellence and will set the tone for our US cultivation and retail expansion.”
What does TerrAscend’s new purchase agreement entail?
Per the agreement, TerrAscend will be purchasing all of Apothecarium’s vertically-integrated operations, which include three dispensaries in California and one in Las Vegas. The Apothecarium also operates Valhalla Confections, an edible manufacturing brand in New Mexico, which is also included in the agreement.
With its unique branding strategy, The Apothecarium is evolving into one of the most recognized cannabis retailers on the west coast. They hold ten licenses in California alone, and combined with TerrAscend’s recent approval for licensing applications in New Jersey, a transaction like this could give the pot stock bi-coastal presence.
Seemingly prepping for the expansion, TerrAscend will keep Apothecarium’s existing staff and board members in their current positions, including Apothecarium CEO Ryan Hudson. The intention is to combine both companies’ knowledge of cannabis culture and cultivation to provide a more healthful experience for medical patients and recreational users alike.
“TerrAscend's focus on health and science is a great fit with our focus on patient education and serving the needs of the community. We chose to work with TerrAscend because they understand the essence of the Apothecarium experience and have the means necessary to bring it to a national audience,” Hudson said of the partnership on Monday.
What’s on the horizon for TerrAscend?
Since TerrAscend kicked off the new year on a three-year cannabis extraction deal with MediPharms Lab (TSXV: LABS; OTCQB: MLCPF), the company seems to be running on all four cylinders. And they are covering all of their bases. TerrAscend’s movement in the first two months of 2019 has ranged from cultivation and extraction to retail and education, positioning them very precisely for where this industry could be headed in the not-so-distant future.
It is no surprise that many investors are playing the waiting game. But while investors wait to see what happens to cannabis stocks when the bubble pops, TerrAscend’s foray into retail should not be slept on. The company’s ambitious expansion plans are matched with their recent access to capital, which may give TerrAscend the protection they need to survive the long-game. Of course, only time will tell. But from the perspective on this side of 2019, it just could pay off to be optimistic.