Cronos Group (TSX: CRON) (NASDAQ: CRON) announced this morning that the company is entering the United States CBD market in a big way. Cronos reported to investors the signing of definitive documents to acquire four operating subsidiaries of Redwood Holding Group.
The deal is valued at $300 million with $225 million payable in cash and the remainder to be paid in CRON stock. If all closing conditions are met, the planned acquisition is expected to close in Q3 of this year.
Redwood is a manufacturer and distributor of high-quality hemp-derived CBD products that are sold through online, retail, hospitality partner channels. The most noteworthy asset being acquired in the deal is the well-know U.S. CBD brand Lord Jones. Lord Jones has a product line that consists of CBD tinctures, gumdrop confections, body lotions, and bath salts. Lord Jones products can be purchased online and in vape shops throughout the United States.
Upon closing of the deal, Redwood and its multiple subsidiaries will remain under their current branding that is already well established and known by its many customers. Redwood’s operational structure which was established by its founders Robert Rosenheck and Cindy Capobianco will also be left in its current form.
Cronos Group’s President and CEO Mike Gorenstein and Redwood’s founder Robert Rosenheck both commented on the acquisition:
“Rob and Cindy have built a differentiated, best-in-class platform with hemp-based CBD formulations that stand for quality and consistency. Our goal is to preserve the integrity of all Rob and Cindy have created, while also learning from them and leveraging Cronos Group’s resources to capitalize on the significant demand for skincare and other consumer products derived from hemp. Leading the industry forward responsibly and being a part of the conversation with industry stakeholders remains a top priority for Cronos Group in this evolving area.” – Mike Gorenstein, Cronos Group.
“The inspiration for our company was simple, we wanted to create a brand we wished we could buy as adult consumers,” said Mr. Rosenheck. “We chose Cronos Group because they share our vision and values and will help us continue our mission. We are incredibly proud of our team and grateful to our customers who are responsible for our success. Cindy and I look forward to working with Cronos Group to further extend the love and enthusiasm for our products.” – Robert Rosenheck, Redwood.
Cronos Group shareholders should be pleased with the terms of the deal as dilution is being kept at a minimum. Cronos will use cash on hand to fund the Redwood acquisition. The company used a similar deal structure in their recent acquisition of the 84,000 sq ft Winnipeg, Ontario manufacturing and fermentation facility. The facility was previously owned by Apotex Fermentation Inc.
Shares of Cronos Stock jumped 8.46% on news of the company entering the burgeoning U.S. CBD space. CRON stock closed trading today at $18.20 per share.
The entire cannabis sector saw strong gains across the board fueled by Aphria’s suprise earnings beat. Aphria (TSX: APHA) (NYSE: APHA) posted record Q4 numbers which included an increase in net revenue of 969% in addition the company reaching profitability in the quarter.
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