TransCanna Holdings (CSE: TCAN) (OTCPK: TCNAF) (FSE: TH8) and Lifestyle Delivery Systems (CSE: LDS) (OTCQX: LDSYF) each issued a press release recently announcing their plans to merge via a proposed business amalgamation. The companies have signed an exclusive agreement to negotiate the planned merger.
The proposed merger is expected to happen via TransCanna acquiring all of the outstanding common shares of Lifestyle Delivery Systems (LDS) in an all-stock deal valued at no less than $51,660,140. The 2 companies will use a fixed exchange ratio of 1 TransCanna Holdings common share for every 10 common shares of LDS.
The Proposed Merger:
- Expected to be completed by way of a plan of arrangement.
- LDS will become a wholly-owned subsidiary of TransCanna upon closing.
- Outstanding LDS options and warrants will be exercisable to acquire common shares of TransCanna Holdings at the ratio mentioned above.
- The new entity would allow for:
- The operational foundation created by LDS to be implemented into TransCanna’s northern California facility.
- The combined entity consisting of TransCanna’s well-known cannabis brands and the expertise of LDS has the potential to:
- Cultivate, process, manufacture and take products direct to market almost immediately upon closing of the merger.
- LDS shareholders will receive a premium on the current market price.
- Would also be protected from any downside pricing risk.
- Between now and the closing date via the purchase price floor of equal to or greater than $51,660,140.
- The fixed share exchange ratio is 10:1 LDS shares for TransCanna shares.
- Would also be protected from any downside pricing risk.
- TransCanna’s management has been successful in creating a comprehensive vision of their vertically-integrated California cannabis operation.
- The merger would make TransCanna’s vision of becoming a leading vertically-integrated California player a reality immediately upon closing.
- The planned merger still requires:
- Completed due diligence by both companies.
- Execution of a definitive agreement
- A fairness opinion.
- Securities Exchange Commission approval.
- Shareholder approval.
- Stock exchange approvals.
- Approval of the British Columbia Supreme Court.
- LDS generated combined gross revenues of $6,795,548 for full-year 2018 and Q1 2019.
- LDS shareholders will represent roughly 13.95 million shares out of 47.81 million shares or approximately 29.1% of TransCanna.
- The combination of CannaStrips’ revenue stream with TransCanna’s massive California facility will push TransCanna towards its goal to become a California market leader.
- Provides TransCanna with 5 operations;
- Annual Licensees for manufacturing (series 5 and 7).
- Transportation and distribution.
- Annual License submissions for nursery and cultivation.
- Additional Municipal dispensary permit with Cal Cannabis annual retail (dispensary) submission.
- The combined entity will include:
- The TransCanna’s owned 196,000 sq ft vertically integrated cannabis facility in Modesto.
- 20,000 sq ft state-of-the-art laboratory, nursery and cultivation & 20,000 sq ft warehouse facility (leased).
- 25.5 acres of owned land in Adelanto, CA with the majority of the land in the “green zone”.
- Potential for significant cost savings and synergies with additional potential for other operating efficiencies including higher profit margins and fewer taxes.
- The combined entity will be an attractive platform for further accretive growth and consolidation throughout California and beyond.
- Enhanced capital markets presence including:
- Analyst coverage.
- Larger shareholder base.
- Increased retail investor base.
“This has the potential to be a transformative acquisition by TransCanna Holdings. The combined company will expedite our processes and corporate goals by at least 24 months. TransCanna will be revenue generating, with the ability to immediately scale throughout California,” stated Jim Pakulis, CEO of TransCanna.
The Company’s CEO, Brad Eckenweiler, stated, “We believe that the amalgamation of our two companies will ultimately yield a value greater than the current individual values of LDS and TCAN. During the coming months, I believe the benefit of this transaction will become apparent to all the parties. The transaction will require approximately 60 days to structure and its closing will be subject to the approval of the Securities Exchange Commission, a fairness opinion, due diligence, and the shareholders’ approval. During the estimated 60-day period the shareholders will have ample time to decide for themselves as to the value of this transaction. Moreover, there is no single group, brokerage or the management for LDS that have a percentage of ownership that would constitute a majority interest capable of deciding this issue alone. This transaction will be decided by the shareholders, period.”
The planned merger is subject to the execution of a definitive agreement and satisfaction of all closing conditions, TransCanna expects the transaction to be completed in September 2019.
TransCanna is holding an investor conference call on Wednesday, July 3rd at 1:15 pm PST. Conference call in numbers: (US) 888-585-9008, (Canada) (888) 299-2873 and (Germany) 0 800 723 5123. The Conference room pin is 477 995 281.
TransCanna Holdings Inc. is a Canadian-based company focused on providing integrated branding, transportation and distribution services, through its wholly-owned California subsidiaries, to a range of industries including the cannabis marketplace.
About Lifestyle Delivery Systems:
Lifestyle Delivery Systems Inc. is a technology company that licenses its technology to a state-of-the-art production and packaging facility located in Southern California. The Company’s technology produces infused strips (similar to breath strips) that are not only a safer, healthier option to other forms of delivery but also superior bioavailability of cannabis constituents. Some strips will also include supplemental co-active ingredients such as nutraceuticals, vitamins and peptides. The technology provides a new way to accurately meter the dosage and assure the purity of selected product. From start to finish, the production process, based on the Company’s technology, tests for quality and composition of all the ingredients used in each and every strip which results in a delivery system that is safe, consistent and effective.
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