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CAN (ON): Mercer Park Brand Acquisition to acquire Glass House group for approximately $567 million

Mercer Park Brand Acquisition has entered into a definitive agreement to acquire Glass House Group and all related assets for total consideration of approximately US$567 million. Subject to the satisfaction of all required conditions, the transaction is expected to close in the first half of 2021.

“When we formed Mercer Park, we aimed to create a platform that could launch the first national cannabis brands in the United States,” said Mercer Park Chairman Jonathan Sandelman. “We view successful cannabis brand-building as a combination of four factors: the ability to control quality biomass at a large scale; produce at the most competitive costs; offer the highest quality products; and deliver the best value proposition to consumers. This took us to California with its ideal growing climate and community of talented and experienced growers, and ultimately to Glass House Group and this incredible portfolio of assets and talent. Glass House has a track record of excellence across all four of these drivers and has established a top-ranked flower brand in one of the most competitive cannabis markets in the world. Combined with the proposed combination with the Southern California Greenhouse asset and 17 proposed Element 7 retail licenses, Glass House Group is poised to become the largest, vertically integrated brand-building platform in California, the world’s largest cannabis market.”

Glass House Group Transaction Highlights
Glass House currently operates a cultivation footprint of over 500,000 ft2, producing over 110,000 lbs. of dry flower biomass per year. Glass House also has an agreement to acquire an additional 5.5 million ft2 state-of-the-art Southern California Greenhouse, an agricultural producer that will transition in phases to cannabis cultivation. This additional capacity is expected to increase Glass House’s current footprint to up to approximately 2.5 million ft2 by 2023. The Company’s total targeted long-term footprint of 6 million ft2 is expected to be by far the largest cultivation capacity in California.

Across the four award-winning dispensaries it currently operates in California, Glass House generated 365,000 transactions, an average in-store ticket of US$65, and an average delivery ticket of US$101 in 2020. In addition to its current footprint, Glass House has entered into an agreement to merge with 17 in-process retail licenses from Element 7, a California company specializing in obtaining dispensing licenses. These licenses are expected to bring the Company’s retail footprint to a total of 21 open locations by the end of the first quarter of 2022, representing the highest statewide store count of any single California cannabis operator.

"Glass House will purchase the additional Southern California Greenhouse capacity well below replacement cost at US$40 per ft2, or US$55 per ft2 on an all-in basis, including capital expenditures required to convert the facility to cannabis cultivation," Mercer Park team explains. "As its expanded greenhouse facilities ramp over time, Glass House expects to reduce production costs from the current rate of approximately US$150/lb. of dry flower to US$100/lb.

Commenting on the acquisition, Glass House’s co-founder and CEO, Kyle Kazan, stated: “We are pleased to partner with the BRND team as we build an even more efficient, expansive platform for our brands. Our inaugural flower brand launch last year was a tremendous success, with our BDS ranking increasing from #63 in the state to #2 by year-end 2020. Further, we have established strong retail and wholesale network and best-in-class cultivation processes, all anchored by a scaled and highly efficient cost structure. I am incredibly proud of the robust operation we have built over the past five years, and we look forward to augmenting these strengths to further capitalize on the growing statewide and national CPG opportunity.”

For more information:
Mercer Park Brand Acquisition
590 Madison Avenue, 26th Floor, New York, NY 10022

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