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Florida-based Cansortium Inc. (CSE: TIUM.U) (OTCQB: CNTMF) and New York-based RIV Capital (CSE: RIV) (OTC: CNPOF) will merge forces into a single new cannabis company, with the blessing of RIV stakeholder Scotts Miracle-Gro (NYSE: SMG), the trio of companies announced Thursday.

Once the deal closes, the newly formed multistate operator will have a cannabis industry footprint in four major markets – Florida, New York, Texas, and Pennsylvania – with a total of eight cultivation and processing facilities and 42 dispensaries.

The deal is a win-win-win for the trio of businesses, according to the announcement, with the merger expected to close by the fourth quarter of this year. The respective boards of directors at Cansortium and RIV Capital both unanimously approved the merger.

The new company is expected to deliver between $5 million and $10 million annually in cost savings through combined efficiencies with the new company’s supply chain, which will be a boon to all three businesses, given that they’ve all posted significant losses in recent quarters: Cansortium lost $22.8 million last year, while RIV Capital lost $47 million in the final three months of 2023 alone, and Scotts Miracle-Gro’s subsidiary, the Hawthorne Collective Inc., has seen cannabis-related sales plummet by 28%.

By combining forces, Cansortium and RIV will have a new balance sheet with plenty of capital to “fund highly accretive growth,” the companies said. The two businesses had a combined $74 million in cash as of March 31.

The 2023 pro forma revenue of the combined company also adds up to $105 million, with a net debt of just $5 million. The merger also will allow the Hawthorne Collective to shed roughly $175 million of debt, according to the release, by trading its “existing convertible notes in RIV Capital for a new class of non-voting exchangeable shares of Cansortium.”

The new company will continue operations under the Cansortium moniker and will trade under Cansortium’s existing ticker symbols for the Canadian Securities Exchange and the over-the-counter markets. Cansortium shareholders will control 51.25% of the new company, while RIV Capital shareholders and Hawthorne shareholders will control the other 48.75%. The new business will also keep Cansortium’s corporate headquarters in Tampa, Florida.

“The plan to bring together these two companies with core strengths in key growth states is expected to position us to drive near-term synergies, capitalize on opportunities for long-term value creation while continuing to provide high-quality service to customers who call Florida and New York home with the FLUENT brand experience,” Cansortium CEO Robert Beasley said.

Beasley, who will also be CEO following the merger, added that the new company will “be able to leverage balance sheet liquidity and the ability to opportunistically allocate capital to growth initiatives … for Cansortium to lead in New York’s emerging adult-use market,” where RIV Capital previously acquired medical marijuana license holder Etain.

For RIV Capital, the deal brings more access to other U.S. state marijuana markets, interim CEO Mike Totzke said.

“In an environment where state-issued cannabis licenses are limited, Cansortium opens doors in important growth markets in the U.S. Additionally, Cansortium has a proven operating model that can bring efficiencies and economies of scale to RIV Capital’s cultivation and dispensary operations,” Totzke said.

Closing of the merger is still subject to shareholder and court approval. The deal also includes a $3 million termination fee to Cansortium if it doesn’t close, along with a $5 million fee to RIV Capital if it doesn’t work out “in certain specified circumstances.”

The post Cansortium, RIV Capital to merge, creating new four-state MSO appeared first on Green Market Report.

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John Schroyer, KahliBuds, 420GrowLife