Cannabis company High Tide eyes more acquisitions as CEO channels Jeff Bezos for e-commerce inspiration

Grover said High Tide isn’t done after buying six companies to build out its direct-to-consumer model.

High Tide
HITI,
+5.73%

HITI,
+4.50%
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
AMZN,
+3.15%
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.

Tilray Inc.
TLRY,
+6.22%
and Aurora Cannabis Inc.
ACB,
+0.64%
both own stakes in the company.

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
THCX,
+2.95%,
AdvisorShares Pure Cannabis ETF
YOLO,
+1.31%,
and Horizons Marijuana Life Sciences Index ETF
HMLSF,
+2.43%
and the ETFMG Alternative Harvest ETF
MJ,
+2.55%.

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