According to Mackie Research Capital Corporation the merger between WeedMD Inc. (OTC: WDDMF) (TSX-V: WMD) and Hiku Brands Company Ltd. (OTC: DJACF) (CSE: HIKU) is expected to create a fully integrated premium brand house. The transaction combines Hiku’s portfolio of brands, marketing and experiential retail stores together with WeedMD’s cannabis production capabilities, deep genetics library, as well as research and development initiatives.
The merger will transpire through Plan of Arrangement through which Hiku will become the majority stakeholder with 51.75% Hiku / 48.25% WeedMD. This deal is expected to be finalized in early July.
Mackie indicates that the combined effort of the companies will result in four scalable production facilities that will provide over 55,000 kg of production capacity. Prior to the merger Hiku’s two production facilities in Kelowna B.C. had funded capacity of over 5,000 kg per year. WeedMD currently operates a 26,000 ft² indoor facility in Aylmer, Ontario and is in the process of retrofitting a 610,000 ft² state-of-the-art greenhouse in Strathroy, Ontario.
WeedMD has demonstrated a strong growth performance in the Canadian market. According to data by Capital IQ & MRCC among the 10 Performers-Canadian Cannabis Companies WeedMD was 2nd, with 21.8% stock return, and Aleafia at first place with 27%. The Largest % Increase in Volume-Canada Cannabis Companies WeedMD scored the 1st place with 219.7% ahead of Canopy Growth at 211.7%.
Benefits of the Transaction:
- Improved control over entire cannabis value chain. Hiku’s established retail operations as a sales channel for premium growing operations will allow for greater wholesale margins.
- Complementary strengths. Hiku’s diverse portfolio of brands and established retail presence, in combination with WeedMD’s production capabilities, genetics, and research initiatives create a uniquely vertically integrated company.
- Diverse brand portfolio. Hiku’s brands cover a range of demographics including urban professionals, active & wellness, medical and senior care, females, and francophone.
- Experienced leadership team. The transaction brings together experienced leaders in branding, marketing, production and medical care.
- Expanded retail network. With 7 retail branding stores already established across Ontario, Alberta, and British Columbia, and one of four retail licenses secured for the province of Manitoba, the combined company has plans to aggressively expand it retail presence across the country. Management is currently looking to add more than 20 retail location through the balance of 2018.
- Ample cannabis cultivation capacity. The combined company currently has more than 55,000 kg for funded production capacity through its four production facilities located in B.C. and Ontario.
- Library of genetics. WeedMD brings its diverse library of genetics selected for premium product in both adult use and medical markets.
- Greater access to capital. The scale of the combined company will lead to greater liquidity and access to capital.
- DOJA. A west coast brand focused on activity and wellness. The first DOJA Culture Café opened in October 2017. This café is strategically located on Kelowna’s busiest street and it will serve as a cannabis information centre that will help build brand awareness and also pre-register medical patients. The café will also offer local roasted coffee, branded clothing and accessories that complement the DOJA Lifestyle.
- Tokyo Smoke. A lifestyle brand that brings sophistication and design to the company. Tokyo Smoke is focused on its non-dispensary retail stores, attracting customers by selling coffee, cannabis accessories and design products. Its stores are located in Ontario, Alberta and British Columbia.
- Van Der Pop. A feminine branded educational platform targeted at women aged 25 to 60 interested in self-care. Van Der Pop was introduced to the portfolio as a wholly-owned subsidiary of Tokyo Smoke.
- Ma?tri Group Inc. is a French-speaking cannabis accessory and design brand. Quebec represents over 20% of Canadian cannabis consumers.
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