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The Green Organic Dutchman to merge with BZAM Cannabis

The Green Organic Dutchman Holdings and BZAM Holdings have entered into a binding and definitive share exchange agreement dated October 18, 2022, with BZAM’s sole shareholder, pursuant to which TGOD will acquire all of the issued and outstanding common shares of BZAM from the BZAM Shareholder, in exchange for common shares of TGOD. The Transaction will result in the BZAM Shareholder ultimately holding an approximate 49.5% of the issued and outstanding Combined Entity Shares upon closing of the Transaction, with the ability to earn additional Combined Entity Shares subject to achievement of certain financial milestones in 2023. All financial information in this press release is reported in Canadian dollars unless otherwise indicated.

Strategic and financial benefits
The combined entity resulting from the Transaction is estimated to be the sixth-largest Canadian cannabis company based on June to August 2022 retail sales, with scale and breadth across major provinces and a complete portfolio of market-leading brands and products. BZAM and TGOD each believe the Transaction is expected to provide strategic and financial benefits, including those outlined below.

TGOD and BZAM generated $30.2 million and $32.2 million, respectively, of net revenue in calendar 2021 and $31.6 million and $32.7 million, respectively, of net revenue from January to September 2022. The Combined Entity generated $85.7 million pro forma unaudited net revenue for the 12 months leading to September 2022. Taken together, BZAM and TGOD have experienced one of the fastest growth rates in the Canadian cannabis market.

Leveraging both BZAM and TGOD’s passion for quality cannabis, innovative products, and brand building, the Combined Entity will serve Canadian consumers with a complete portfolio of flowers and 2.0 products. BZAM’s best-selling vapes, infused pre-rolls, and high-quality flowers across every price point are sold under the BZAM, -ness, Table Top, Dunn Cannabis, and FRESH brands, which have a strong market presence in British Columbia and Alberta. TGOD’s organic premium flower and hash, under TGOD and Highly Dutch brands, are popular in Ontario and Quebec, while TGOD’s joint venture with Wyld has delivered some of the fastest-growing cannabis edibles across Canada since their commercial launch in December 2021.

The Combined Entity will have a local production presence in the largest provinces and over 400 listed SKUs across Canada. The Combined Entity’s facilities are right-sized to demand without the need for material capital expenditure. The facilities offer complete, scalable capabilities for the Combined Entity’s broad range of cannabis products.

The combination of BZAM and TGOD is expected to deliver at least C$10 million of annualized cost synergies within the first three quarters following the completion of the Transaction, aiding in the achievement of positive adjusted earnings before interest, taxes, depreciation, and amortization by mid-2023. The Combined Entity expects to achieve cost synergies in the key areas of cultivation and production, cannabis and product purchasing, sales, marketing, and corporate expenses. BZAM’s Pitt Meadows, British Columbia facility will also provide TGOD with low-cost THC distillate and extraction capabilities, which is expected to improve cannabis 2.0 product margins. The Combined Entity expects to share a unified sales force leading to improvements in geographical coverage and increased retail distribution. The Transaction is expected to result in a stronger balance sheet and provide the Combined Entity with access to lower-cost capital.

Proven leadership team
The Combined Entity will be led by an experienced management team and board of directors with strong track records in the cannabis. Upon completion of the Transaction, BZAM’s current Chief Executive Officer, Matt Milich, and Chief Commercial Officer, Jordan Winnett, will lead the Combined Entity as CEO, CCO, along with TGOD’s current CEO and Interim Chief Financial Officer, Sean Bovingdon, who will take the role of CFO, in order to assist with the integration of BZAM and TGOD and the transitionary period of the Combined Entity. The board of directors of the Combined Entity will consist of seven members, including five members from TGOD’s existing board of directors and two members nominated by BZAM.

“This is an exciting day for both companies, for our employees, and for our consumers. We are bringing together two rapidly growing companies that share a passion for cultivation, innovation, and brand development,” said Mr. Bovingdon. “Our highly complementary businesses in terms of production footprints, products, and distribution networks create a Combined Entity with a leading branded product portfolio along with significant synergies across our operations.”

“We are looking forward to bringing together TGOD’s organic flower and hash with our crowd-pleasing vapes and the exceptional flower of our craft partners, including Dunn Cannabis and FRESH,” added Mr. Milich. “Together, we expect to expand on what we have each accomplished so far as we build a strong, EBITDA-positive cannabis company.”

Transaction details
In consideration for all the issued and outstanding common shares of BZAM, upon Closing, TGOD will issue Combined Entity Shares to the BZAM Shareholder in two tranches, totaling an approximate 49.5% ownership stake of the Combined Entity.

In addition, the BZAM Shareholder is also entitled to earn up to $33 million in Combined Entity Shares, subject to the achievement of certain Milestones. The Milestones include payouts of Milestone Shares tied to annual net revenue targets and positive adjusted EBITDA targets for 2023. The Transaction is scheduled to close on or about November 3, 2022, subject to a number of customary conditions being satisfied or waived. Each Milestone Share shall be issued at a deemed price of the greater of $0.0596, that being the 15-day volume weighted average price of the common shares of TGOD immediately prior to the date the Agreement was signed and the minimum price permitted under the policies of the Canadian Securities Exchange.

In accordance with the terms of the Agreement, the BZAM Shareholder will enter into a contractual lock-up agreement, whereby the Combined Entity Shares received as part of closing, and excluding the Milestone Shares, shall be subject to escrow with 1/3 of such Escrowed Shares being released on the 4-month, 8-month, and 12-month anniversaries of the date such Escrowed Shares are issued.

For more information:
The Green Organic Dutchman

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