Ayr Strategies Moves to Definitive Merger Agreement with Blue Camo, LLC (Arizona)

Ayr Strategies Inc. (CSE: AYR.A, OTCQX: AYRWF) (“Ayr” or the “Company”), a leading vertically integrated cannabis multi-state operator, has signed a Definitive Agreement to acquire the membership interests of Blue Camo, LLC, following the previously announced Letter of Intent.

As announced on November 4, 2020, Ayr intends to purchase 100% of the membership interests of Blue Camo, LLC, a vertically integrated operation in Arizona. Key operations include three Oasis-branded dispensaries in the greater Phoenix area, a 10,000 ft2 triple-stacked cultivation and processing facility in Chandler and an 80,000 ft2 cultivation facility under development in Phoenix.

“Arizona has been a terrific medical market, third in the U.S. in terms of patient penetration at over 3.8% and currently generating approximately $1 billion in annual revenue1. Last week, the Arizona Department of Public Health began approving applications for adult-use sales. Thus far, approximately 90 locations have been approved, including the three Oasis-branded dispensaries that we will be acquiring. Oasis’ adult-use sales commenced on Monday, January 25th to a large crowd of excited customers waiting to experience first-hand the end of cannabis prohibition in Arizona. We are thrilled to see the state move quickly to make safe, tested and regulated cannabis available for adult-use following the overwhelming support it received at the ballot box in November,” said Jonathan Sandelman, Chairman and Chief Executive Officer of Ayr. “We look forward to working with the regulators and team of over 110 people in Arizona to ensure a successful roll out of recreational sales in Arizona.”

The terms of the transaction include upfront consideration of $75.4 million, made up of $9.5 million in cash, $37.4 million in stock (approximately 2.57 million shares priced at 10-day VWAP prior to announcement) and $28.5 million in seller notes. An additional 2 million shares will be placed in escrow and will be released upon the achievement of established production targets at the new cultivation facility.

Additional earn-out consideration in 2021 and 2022 may be paid in shares exchangeable into subordinate voting shares of Ayr, priced at the then 10-day VWAP, with the earnout value calculated based on a set discount to Ayr’s then trading enterprise value to Adjusted EBITDA multiple and based on exceeding Adjusted EBITDA hurdles in each year.

The acquisition is subject to certain closing conditions and regulatory approvals.

1Viridian Capital Advisors, 1/25/21.

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