Schwazze, formerly operating as Medicine Man Technologies Inc. (OTCQX: SHWZ) (“Schwazze” or “the Company”), today announced that it has closed on the asset purchase of the five Star Buds dispensaries located in Colorado that it had not already previously acquired. The acquired dispensaries are located in Aurora (2), Denver, Louisville, and Westminster.
Total consideration was approximately $72.3 million, consisting of $27.5 million in cash, $26.9 million in sellers’ notes, and $17.9 million in Preferred Stock (at a price of $1,000 per share).
Star Buds is a recognized and successful retail cannabis operator in the United States and home to a wide selection of strains, concentrates, edibles, tinctures, and best-in-class customer service. Inclusive of this transaction, Schwazze now owns and operates all 13 Star Buds locations in Colorado and its retail footprint now includes 17 dispensary locations in the Denver metro and southern Colorado region.
For 2020, the 13 Star Buds retail dispensaries generated total revenue of approximately $70 million and net income in the range of approximately 40% of revenue. Together with Schwazze and the proforma revenue for 2020 Mesa Organics Ltd, acquired by Schwazze in April 2020, total 2020 proforma revenue is estimated to be approximately $95 million on a combined basis.
The Company will be providing 2021 guidance during its 2020 year-end conference call near the end of March.
“We are excited to have completed our acquisition of Star Buds Colorado, a highly respected, innovative and trusted retail operation characterized by high quality products and its budtenders’ commitment to customers and cannabis expertise. Our intention now is to integrate these five locations, utilizing our proven integration playbook that streamlines the M&A process and drives operational and financial synergies. We are looking forward to growing the Star Buds brand through internal and external methods,” said Justin Dye, Chief Executive Officer of Schwazze.
Transaction Background
On June 8, 2020, Schwazze announced that it had reached definitive agreements to acquire all 13 Star Buds locations in Colorado, represented by 13 different ownership groups and agreements. On December 21, 2020, Schwazze announced the closing of the asset purchase of six Star Buds Colorado retail locations, and on February 4, 2021, Schwazze announced the closing of the asset purchase of an additional two Star Buds Colorado retail locations.
Schwazze is the leading vertically integrated cannabis holding company in Colorado with a portfolio consisting of top-tier licensed brands, spanning: cultivation, extraction, infused-product manufacturing, dispensary operations, consulting, and a nutrient line, all under one entity. In April 2020, Schwazze was the first publicly traded company to complete an acquisition following the new legislation of Colorado House Bill 19-1090 which allowed for public company ownership of cannabis operations. The Company’s inaugural acquisition included the purchase of Mesa Organics, a Southern Colorado dispensary chain with locations in Pueblo, Ordway, Rocky Ford, and Las Animas as well as Purplebee’s, a leading pure CO2 and ethanol extractor and manufacturer.
DelMorgan & Co. served as lead financial advisor in connection with Schwazze’s financing of the transaction, including sourcing the equity and debt capital and providing fairness opinions to Schwazze in connection with the financing.
