Delta 9 Cannabis Inc. has purchased 17 Uncle Sam’s Cannabis retail cannabis stores in Alberta. The Uncle Sam stores operate under the Uncle Sam’s Cannabis and Discounted Cannabis brands.
“We are pleased to have finalized this transaction to grow our market share in the Canadian retail cannabis market with an additional 17-store presence,” says John Arbuthnot, CEO of Delta 9. “Delta 9 now has 34 retail cannabis stores in operation across Canada and is positioning as one of the country’s largest vertically integrated cannabis retailers. The company has an aggressive growth strategy to actively acquire cannabis retail stores that will provide meaningful revenue growth and positive adjusted EBITDA.”
The purchase price paid by Delta 9 Cannabis Store relating to the Uncle Sam transaction was $12,500,000, subject to customary adjustments. Uncle Sam also received 6,666,667 common shares of the Company at a deemed price of $0.277 per share.
To fund this purchase, Delta 9 will be getting $32 million from Connect First Credit Union and $10 million in additional funding will be provided by Sundial Growers in the form on convertible debentures. “Sundial is pleased to expand its successful partnership with Delta 9,” says Zach George, Chief Executive Officer of Sundial. “The Sundial Debenture is in line with our core philosophy providing downside protection and cash flow with longer-term strategic upside potential. Delta 9 is a leader in the regions in which they compete, and complementary to our current geographical footprint.”
Arbuthnot says, “We also look forward to expanding our long-standing commercial partnership with Sundial as we position our respective brands for long-term success in the Canadian market.”
The Uncle Sam’s Cannabis retail stores have demonstrated significant revenue, EBITDA, and earnings growth over 2020 and 2021. Delta 9 expects the Uncle Sam Transaction to gradually grow in 2022 and 2023 before it sees synergies. The acquisition represents an attractive revenue multiple of approximately 0.68x annualized revenue.
The final closing of the Uncle Sam Transaction remains subject to the approval of the TSX.