TerrAscend, a North American marijuana company, is entering Michigan’s monstrous marijuana market by acquiring marijuana operator Gage in a deal worth $545 million.
The company has reached a deal to buy local operator Gage Growth in an all-stock transaction worth $545 million.
According to TerrAscend, which has operations in both the U.S. and Canada, the deal will give it a leading position in Michigan, which the company considers the third-largest American cannabis market.
“Combining our market-leading share in our existing states with Gage’s proven cultivation, retail, and marketing capabilities, creates one of the largest and most dynamic companies in the industry,” TerrAscend Executive Chair Jason Wild said in a news release.
As part of the deal, Gage shareholders will receive 0.3001 common shares of TerrAscend in exchange for each Gage share, representing an 18% premium for Gage shares based on the companies’ closing share prices Tuesday.
The press release details that the combined business will operate in five states – California, Maryland, Michigan, New Jersey and Pennsylvania – and Canada.
It will also own seven cultivation and processing facilities, including three Gage facilities in Michigan.
It additionally will own 23 operating dispensaries in medical and adult-use markets, including Gage’s 10 operating dispensaries in Michigan.
Gage plans to open 10 more Michigan dispensaries “in the coming months,” according to the release as well.
Detroit-based Gage had $32.8 million in cash “with minimal debt” as of June 30.
Jefferies equity analyst Owen Bennett said on Wednesday, “Although Michigan’s wholesale marijuana prices “are much lower than other nearby limited license states.
He added, “to date, the bigger (multistate operators) have avoided Michigan as (it is) harder to make money, and therefore (there is) less ‘big player’ competition.”
The deal, subject to shareholder and regulatory approvals, is expected to close in the first half of 2022.
TerrAscend or Gage may pay a $30 million termination fee “if the transaction is not completed under certain limited circumstances.”
