US (OR): Acquisition completed of a Medford-based 30,000 sq. ft. indoor facility

Grown Rogue's subsidiary, Grown Rogue Distribution, has signed a Definitive Agreement and Management Services Agreement HSCP, a subsidiary of Acreage Holdings for a previously operational, state-of-the-art 30,000 Sq Ft indoor facility located in Medford, Oregon, and a fully operational retail dispensary in Portland, Oregon. The acquisition brings Grown Rogue’s total indoor capacity to 127,000 Sq Ft.

"The new indoor cultivation added 30,000 Sq Ft state-of-the-art indoor facility," the team with the company explains. "Total annual revenue capacity increased to $20M USD. This acquisition further reduces one of the industry’s lowest cash cost of production of $0.80 USD/gram with improved economies of scale."

“This strategic asset acquisition further solidifies our commitment to the Oregon cannabis market, which saw a record $1.1B USD in sales in 2020 according to the Oregon Liquor Control Commission,” said Obie Strickler, Chief Executive Officer of Grown Rogue. “The new indoor facility will more than double our Oregon capacity and yearly production volume and, more importantly, Grown Rogue is positioned to generate $20M USD per year in revenue on a pro-forma basis including $10M USD in wholesale sales in Oregon and a projected $10M USD of revenue from our Michigan partner’s operations. Over the past 5 years, we have developed proprietary operational and sales processes to achieve a consistent operating margin greater than 40%, which we expect to continue. We have reinvested the healthy cash flow into the company and this asset acquisition actualizes our commitment to scaling a robust profitable model providing our shareholders even greater value creation.”

The recently constructed, state-of-the-art indoor facility is located only five minutes from the existing Grown Rogue facility. The physical proximity of the two facilities offers economies of scale which will further drive down Grown Rogue’s cash cost to produce at or below $0.80 USD/gram. The new facility is expected to produce an estimated 2,400 pounds or $2.5M USD in revenue (against expenses of $1M USD) of high-quality indoor flower for the remainder of 2021 (partial year) and upon conversion of a fourth growing room from vegetative to flower, the facility will have capacity to produce 5,000 pounds or $6M USD in revenue (against expenses of $2.5M USD) of Oregon’s highest quality flower in 2022 (full year). Grown Rogue will begin retrofitting and implementing proprietary operating procedures immediately under the MSA until final close of the asset, which is expected in approximately 6 months, subsequent to final regulatory approvals.

Total consideration for the acquisition is $3M USD to be paid in a series of tranches based on estimated regulatory approvals not to exceed 18 months.

“This value acquisition is another example of our talented team’s disciplined focus on our core competency of high-quality, low-cost flower production,” added Mr. Strickler. “We are picking up where we left off in 2020, when we completed a controlling interest acquisition of a first-rate cannabis asset in Michigan. We continue to execute on our business strategy of acquiring undervalued assets, creating further value and profitability by applying our proven best practices, and providing excellent return on invested capital.”