VLNCF - Valens Buys Citizen Stash For $54 Million In All Stock Deal
The Valens Company Inc. (OTCQX: VLNCF) is buying Citizen Stash Cannabis Corp. (formerly Experion Holdings Ltd) (TSXV: CSC) (OTCQB: EXPFF) in an all-stock deal valued at approximately $54.3 million on an enterprise value basis. Citizen Stash shareholders will receive 0.1620 of a Valens common share for each Citizen Stash Common Share held. The Exchange Ratio implies a premium per Citizen Stash Common Share of approximately 35.1%. Valens said the Citizen Stash acquisition is expected to be accretive in 2021 and 2022 before synergies and will provide Valens with a strategic, asset-light expansion into flower and pre-rolls, the largest segments of the Canadian cannabis market currently accounting for over 70% of retail sales. Prior to the acquisition, Citizen had signed a processing agreement with The Valens Company to outsource the production of Citizen Stash pre-rolls, supporting a lower cost of goods moving forward for pre-rolls.
Citizen Stash is a licensed cultivator and processor of premium craft cannabis products based in Mission, British Columbia. Citizen Stash operates an asset-light platform made up of a network of craft contract growing partners from which it selectively sources premium bulk flower grown from Citizen Stash’s industry-leading proprietary genetics. Citizen Stash manufactures and packages flower and pre-roll products primarily through manual processes. Last month, Citizen reported that its gross revenue increased 92% in Q2 2021 to $3.3 million versus $1.7 million in Q2 2020.
“We are excited to join forces with Citizen Stash’s experienced team and broaden our offerings in the flower and pre-roll verticals with a best-in-class brand.,” said Valens CEO Tyler Robson. “The premium price tier of the flower and pre-roll segments represents the best expansion opportunity for Valens in the flower category, as premium brands are the hardest to build, while also capturing the highest margins. Citizen Stash’s asset-light model, and proprietary genetics will provide us significant operational flexibility and an opportunity to leverage the growing capabilities of our existing LP partners. In short, this strategic acquisition will allow Valens to significantly expand its presence in the recreational market and capture a share of the largest categories of the Canadian cannabis space without the burden of a high-cost growing infrastructure. We are opportunistically expanding our product offering to align with consumer demand for high-quality craft cannabis flower and pre-rolls.”
Citizen Stash
Citizen Stash is reported to be one of the top-performing premium brands in the flower and pre-roll categories. Based on Hifyre data for the flower category during March to May 2021 in the markets of Ontario, Alberta, and British Columbia, Citizen Stash is the highest-ranked premium brand by market share in the flower category with an average selling price above $13.00 per gram and is the only brand in the top 20 by market share with an average selling price above $13.00 per gram. Within the pre-roll category during March to May 2021 in the markets of Ontario, Alberta, and British Columbia, Citizen Stash is the third-highest ranked premium brand with an average selling price above $13.00 per gram and one of only five within the top 20 overall brands.
Jarrett Malnarich, Chief Executive Officer of Citizen Stash, said, “Combining our business with The Valens Company represents an outstanding opportunity for our company and the shareholders of Citizen Stash and is wholeheartedly endorsed by our Board of Directors. We look forward to the full integration of Citizen Stash with The Valens Company. We believe the combination will create a leading platform in the Canadian cannabis industry which spans all categories, while focusing on profitability and creating value for all shareholders. Together we look forward to taking the Citizen Stash brand to new heights that Citizen Stash could not have achieved on its own, by leveraging Valens’ best-in-class, low-cost manufacturing capabilities and industry-leading distribution scale. In our collaboration with Valens to date, Citizen Stash has come to realize the common values we share centered around providing consumers with the highest quality cannabis products.”
This acquisition is anticipated to solidify Valens’ position as a top tier cannabis company by enhancing the Company’s market share and adding an innovative, premium flower brand to its portfolio. Closing of the Citizen Stash transaction will mark the third acquisition Valens has made this year, which will accelerate Valens’ strategic initiative to create a leading global manufacturing platform, capture market share through innovative product launches with unique consumer experiences, and expand on its existing domestic and international distribution network to better capitalize on the global opportunity.