Harborside Inc. chairman Matthew Hawkins said the company plans to continue its acquisitions in California to strengthen its presence in the largest legal cannabis market in the United States.
The Oakland, Calif., HBORF Company,
is merging with two companies in Southern California: dispensary operator Urbn Leaf and cultivation specialist Loudpack, as announced on Monday.
“In this situation, the whole is much better than the sum of the parts because the scale is going to win in California,” Hawkins told MarketWatch.
Harborside closed its $ 44 million acquisition of Sublime LLC, an Oakland-based cannabis maker, in July.
Harborside plans to combine Urbn Leaf, Loudpack and Sublime and then change its name to StateHouse to trade on the Canadian Stock Exchange under the symbol “STHZ”, with stocks also available on the US market over the counter. The transactions are expected to be finalized in the first quarter of 2022.
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“Our job is to integrate four companies and that will be our primary focus,” said Hawkins. “And then after the first quarter, we’ll start looking. Our deal pipeline is full of opportunities, but we have to be smart when we leap. “
As part of the latest deal, Urbn Leaf CEO Ed Schmults will become CEO of StateHouse. However, Harborside will continue to control the company with three seats on its board of directors, with Hawkins remaining chairman. Hawkins is also the Founder and Managing Director of Cresco Capital Management LLC, which initially invested in Harborside in 2016. Hawkins joined the Harborside Board of Directors in 2018.
Urbn Leaf will combine its cannabis dispensaries in Southern California with Harborside’s retail presence in Northern California, while Loudpack and Sublime will add to the company’s brand portfolio and cannabis cultivation holdings .
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With combined revenues of $ 215-220 million, StateHouse plans to continue to strengthen itself to compete in the fragmented cannabis market in California, which faces oversupply and competition from cheaper products from the illicit or traditional market. .
Despite these hurdles, the California market offers rich rewards in some ways due to its size and fragmentation. The state’s legal cannabis business now has 7,800 growers, 1,000 distributors and 1,300 brands, with projected sales of $ 7.4 billion by 2025, according to figures from a presentation from Harborside.
Harborside positions itself as the state’s largest cannabis hub with retail, brand, processing, manufacturing, distribution and cultivation.
Other larger players in California include Glass House Brands Inc. GLASF,
and Lowell Farms Inc. LOWLF,
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As part of its acquisitions of Urbn Leaf and Loudpack, Harborside signed a letter of intent with Pelorus Equity Group to complete $ 77.3 million in non-dilutive real estate debt financing.
Travis Goad, managing partner of Pelorus Equity Group, said the financing deal with Harborside marks its largest individual debt deal since the company launched in 2010. The Laguna Hills, Calif., Based specialty finance firm, plans to have approximately $ 250 million in assets under management. by the end of 2021.
Despite the weak stock prices in the sector, companies remain viable, he said,
“We are seeing that revenues from these assets continue to grow and markets develop,” Goad said. “Even though stocks are underperforming, the underlying cannabis business in the US is growing. This is what matters to us. These assets really have value. Even in a more mature market like Colorado, it continues to grow by around 20%. The price action in the public equity market doesn’t quite reflect what you see on the ground in these companies. “
Harborside shares fell 3.7% to 52 cents a share on Friday. The stock is down 67% so far in 2021, compared to a 24.9% loss in the current year by ETF Cannabis THCX,
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