MJardin Group, a manager of cannabis cultivation, processing and retail businesses, is pursuing a roughly $200 million pipeline of acquisitions in the space while raising capital from institutional and retail investors, an executive at the company tells Real Money.
The pending deal estimate from Denver-based MJardin reflects expected transactions with cannabis business cultivators, extraction specialists and retail operators -- many of which have already hired MJardin to help them manage their operations.
The transactions may come from this base of about 30 cannabis businesses currently working with MJardin in a variety of geographies. MJardin-managed licensed facilities have produced and sold more than 100,000 kg of cannabis combined.
While public market valuations of cannabis companies remain prohibitive for M&A transactions, these small, privately held companies may be purchased for lower multiples says Rishi Gautam, executive chairman of MJardin.
"If you're a private business owner that owns a cultivation, extraction or retail business -- most don't feel they can go public on their own," Gautum said. "If they partner with us as an equity owner, they know they'll get a lift from our public market valuation and they'll get to partner with a proven operator to enhance their business. It's been an effective way to lower our purchase price multiples below public market valuations."
MJardin has raised and continues to raise capital on a number of fronts, as do others.
MJardin Group said Thursday it hired Canaccord Genuity Corp, to act as sole bookrunner, together with KES 7 Capital Inc. as co-lead agent to sell, on a best efforts private placement basis, subscription receipts. The company declined to provide details on the size of the offering.
The offering will be completed in conjunction with the company's reverse take-over of Sumtra Diversified Inc. and proposed listing on the Canadian Securities Exchange (CSE) in a few weeks.
In December, the company closed a $20 million private placement with KES 7 Capital as agent. The placement attracted investments from large institutional Canadian investors, Gautam said.
Gautam said the earlier private placement investors came from "smart money" institutions such as Canadian long-only money managers.
Now it's going out to public markets for broad exposure to investors through the subscription receipts and the stock offering.
While detailed financial statements are pending completion of the company's reverse merger, MJardin is already profitable with strong cash flow, recurring revenue and royalties through its alliance with Toronto-based GrowForce Holdings Inc.
In April, MJardin spun off GrowForce to become a vertically integrated cannabis platform company outside the U.S. GrowForce inked a license agreement with MJardin for the exclusive rights to its cannabis management services and intellectual property portfolio in international markets.
"We've quietly built one of the most substantive businesses in the space, " Gautam said.