Schwazze, (OTCQX: SHWZ) (“Schwazze” orthe “Company”), announced signed definitive documents to acquire the assets of Southern Colorado Growers (“SCG”) in Huerfano County, Colorado. The proposed transaction includes 34 acres of land with outdoor cultivation capacity, as well as indoor, greenhouse, and hoop house cultivation facilities and equipment. This planned purchase continues Schwazze’s expansion in Colorado and, is the company’s first major move into cultivation, which will provide high-end, premium cannabis directly to its Star Buds dispensaries and significant production of biomass for its PurpleBee’s extraction and manufacturing facility. PurpleBee’s is Colorado’s largest supplier of wholesale distillate for the CPG market, providing quality distillate to leading vaporizer, concentrates and edibles companies.
The consideration for the proposed acquisition is $6.8 million for the business and $4.5 million for the real estate and farm assets. Total consideration of $11.3 million will be paid as $5.9 million of cash at closing and $5.4 million in Schwazze common stock at closing.
After closing, Schwazze has major expansion plans for SCG which includes the buildout of additional hoop house facilities over the next four quarters. SCG produces premium flower with approximately 30 strains and has won multiple Connoisseur Cup awards for select strains in 2020.
“This is just the beginning of our foray into the cannabis cultivation space. We believe our partnership with a premier cannabis cultivator such as SCG will provide our customers with premium quality flower in all of our 17 Star Buds Colorado locations. In addition, this acquisition will dramatically increase our capability to produce a significant amount of biomass for our Purplebee’s MIP which, in turn, benefits the entire cannabis industry throughout the state. As a result of this net add to our vertical integration, the acquisition of SCG is expected to provide a healthy positive margin impact for Schwazze,” said Justin Dye, Schwazze’s CEO.
The acquisition is expected to close in Q3 2021, subject to closing conditions and covenants customary for this type of transaction, including, without limitation, obtaining MED and local licensing approval.
