Grown Rogue International has increased ownership in its Michigan operations from 52.2% to 80% in two transactions for total consideration of US$2.8M, with US$0.2M paid in cash and US$2.6M paid by way of 4 year sellers' notes.
The transaction details are as follows:
- Grown Rogue increased its ownership in Golden Harvests, LLC, the entity that controls its Michigan operations, operating out of an 80,000 sq ft facility that contains approximately 15,000 sq ft of flowering bench space.
- Canopy Management, LLC holds a 60% interest in Golden Harvests and Canopy is 87% indirectly owned by the Company.
- The Company purchased the total remaining minority interest in Canopy for US$0.8M, which includes a 20% down payment in cash and monthly payments for a period of 4 years with an interest rate of 5.2% per annum.
- The Company purchased 20% of the minority interest in Golden Harvests for US$2.0M, which includes minimum quarterly payments in cash for a period of 4 years.
- The transaction provides for a valuation of Golden Harvests at US$10.0M.
- All payments owing to the sellers are expected to be completed with cash on hand and cash generated from operations.
- The Company retains the option to acquire the remaining 20% of Golden Harvests at a fair market valuation.
"We are excited to announce that we increased our ownership in Golden Harvests to 80%. I would first like to thank Dave Pleitner for being such a great partner as we built the Michigan business together. Our relationship set the blueprint for how we use high-quality local partners to enter new markets, like we are currently doing in New Jersey and Illinois. We cannot stress enough the importance of having a boots-on-the-ground partner with real skin in the business to drive success at the local level. All future partnerships will be measured against the excellence and collaboration of this partnership, and we view this transaction as a true win-win for Dave and our shareholders," said Obie Strickler, CEO of Grown Rogue.
"Michigan is such an important asset to our Company because it was the first market we proved we could migrate our operational excellence from Oregon to additional markets. Michigan has been a tremendous market for us, and we are thrilled to own a larger piece of this strong business. Michigan still has approximately 25,000 sq ft of facility that can be built out and we are in discussions to expand and optimize the additional capacity," continued Mr. Strickler.
According to the Michigan Cannabis Regulatory Agency, Michigan reported over US$3.0 billion in cannabis sales in 2023, making it the second largest cannabis market in the United States. In March 2024, sales hit a new monthly record at US$288.8 million.
The minority interest in Golden Harvests is owned by Dave Pleitner, an insider of the Company, and 8% of the interest in Canopy is owned by certain directors of the Company. Such insider participation represents a related-party transaction under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), but the transaction is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 as neither the fair market value of the subject matter of the transaction, nor the consideration paid, exceed 25% of Grown Rogue's market capitalization.
For more information:
Grown Rogue
info@grownrogue.com
www.grownrogue.com