OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS

M&A Transactions

M&A Transaction Chart

Viridian publishes weekly data on M&A transactions in the Cannabis/CBD/Psychedelic industries. This data includes information about the buyer and seller (public/private, state/country location), deal size, deal structure (cash, stock, earn-out), pricing, share information, and deal implied valuation.

Week ended 01/20/2023

Week ended 01/20/2023

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M&A Transactions Commentary

Viridian publishes weekly insights on the M&A landscape in the Cannabis/CBD/Psychedelic industries. These insights typically highlight the most interesting/meaningful M&A transactions for that week, and commentary on market conditions, M&A deal structures, target regions for acquirers, and industry sectors ripe for consolidation.

Week ended 01/20/2023

The Largest Closed and Disclosed M&A Deal of the Week:

  • On January 17, 2023, SNDL Inc. (SNDL: Nasdaq, the fourth largest Canadian LP with a market cap of approximately $600M, announced the closing of its purchase of The Valens Company (VLNS: Nasdaq)(VLNS: TSX), a concentrate manufacturer.
    • Equity consideration of $58.26M was paid entirely in SNDL stock. SNDL also assumed approximately $44.8M of VLNS debt for a total transaction value of $103.1M, representing about 1.4x VLNS LTM revenue and .86x consensus 2023 revenue. (Valens had a slightly negative projected EBITDA for 2023).
    • The acquisition multiple strikes us as reasonable, given Valens’ liquidity, leverage, and profitability profile.
    • One of SNDL’s main justifications for the acquisition is that Valens gives SNDL low-cost biomass sourcing, and the combined company will be able to extract around C$10M in synergies per year. We are skeptical of this rationale. First, the market is awash in excess supply, and access to low-cost biomass does not seem like a scarce attribute. Secondly, the only way to extract that degree of “synergies” is through a great deal of bloodletting, a process that tends to destroy the culture of the acquired entity. A better bet might have been to buy Valens from an eventual bankruptcy sale.
    • We do understand Valens’ motivation to sell. Let’s call it survival. It is telling that Valens shareholders received zero cash in the deal. The company was in a weak position to negotiate. Out of the eight Canadian non-biotech companies with market caps between $20M and $100M, the Viridian Credit Tracker model ranks Valens as third from the bottom, being edged out by the Green Organic Dutchman (TGOD: CSE), and Fire and Flower (FAF: CSE).

Week ended 01/20/2023

This is the MA basic

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