By Steve Gelsi
High Tide CEO Raj Grover said the company is making its largest acquisition in its 12-year history as part of a plan to build up its online cannabis marketplace in the vein of Amazon.com.
“Jeff Bezos is truly an idol for me,” Grover told MarketWatch. “That’s where my inspiration for our direct to consumer approach comes from…He’s changed the world.”
Grover said High Tide isn’t done after buying six companies to build out its direct-to-consumer model.
High Tide /zigman2/quotes/201958100/composite HITI -3.53% /zigman2/quotes/222662325/delayed CA:HITI -2.83% on Monday announced plans to acquire 80% of Denver-based CBD products company NuLeaf Naturals at an enterprise value of $39 million in its largest acquisition yet.
High Tide will buy 80% of Denver-based NuLeaf Naturals for $31.24 million and will have a three-year option to acquire the remaining 20% of the company at any time.
Founded in 2014, NuLeaf produces and distributes premium cannabidiol (CBD) wellness products. It’s able to produce 60,000 plant-based softgels per hour and is one of only a few manufacturers in the U.S. that makes vegan softgel capsules. NuLeaf offers a potential C$2 million in cost savings by combining some of its facilities with other operations at High Tide.
The deal is part of High Tide’s plan to position the company to benefit from online sales of cannabis in the U.S. if Congress legalizes adult use cannabis at some point. The company wants to become more like Amazon /zigman2/quotes/210331248/composite AMZN -1.65% as a force in online sales.“Our M&A pipeline continues to be robust,” Grover said. “We’ll do more and more deals focused on the online side of the business. That’s where the future is headed.”
High Tide is banking on its loyalty club of about 250,000 to lay the foundation for a large online presence in the U.S. cannabis space.
Other acquisitions by High Tide include Scotland-based Enigmaa Ltd., operating as Blessed CBD for about $15 million, as well as Meta Growth Corp., Smoke Cartel, Inc., Fab Nutrition LLC and DHC Supply LLC and DS Distribution Inc. (DankStop).
High Tide ranks itself as the largest Canadian retailer of recreational cannabis as measured by revenue, with 104 current locations in Ontario, Alberta, Manitoba and Saskatchewan.
Its e-commerce platform will also allow it to potentially sell online cannabis to the U.S. market once it’s legal on a federal level. For now, it’s building up its U.S. presence with legal sales of CBD and accessories via Grasscity.com, Smokecartel.com, Dailyhighclub.com, and Dankstop.com as well as CBDcity.com, FABCBD.com, and BlessedCBD.
In October, High Tide announced a debt facility of up to C$25 million with ATB Financial at an expected interest rate of less than 6% per year.
In the third quarter of 2021, High Tide swung to a net loss of C$1.75 million or C3 cents a share, on higher expenses, which included costs to uplist its stock to the Nasdaq. In the year-ago quarter, High Tide reported net income of C$3.83 million or C23 cents a share. Revenue increased 99% to C$48.1 million from C$24.1 million in the year-ago quarter.
Revenue from the United States increased to C$9.6 million in the third quarter from C$5.7 million in the second quarter.
High Tide also been added to the Cannabis ETF /zigman2/quotes/213173823/composite THCX -2.03% , AdvisorShares Pure Cannabis ETF /zigman2/quotes/211349815/composite YOLO -3.17% , and Horizons Marijuana Life Sciences Index ETF /zigman2/quotes/200444869/composite HMLSF -2.22% and the ETFMG Alternative Harvest ETF /zigman2/quotes/204332491/composite MJ -1.63% .