KushCo Holdings agrees to transformative merger; to become subsidiary of Greenlane Holdings

KushCo Holdings Inc (OTCQX:KSHB) and Greenlane Holdings Inc (NASDAQ:GNLN) announced Wednesday that they have reached a definitive merger agreement, under which KushCo will become a wholly owned subsidiary of Greenlane.

The companies say the merger establishes a leading ancillary cannabis company serving a premier group of customers, which includes many of the leading multi-state-operators (MSOs) and licensed producers, the majority of the top smoke shops in the US and millions of consumers. The deal is expected to generate some $15 million to $20 million of annual run-rate cost synergies within two years, the companies said.

The combined company is expected to offer a diverse customer product offering, including: consumption devices, vaporizers and accessories; supplies and child-resistant packaging; papers and wraps; and complementary solvents and natural products.

READ: KushCo Holdings pays $17M to retire senior unsecured term debt

The new entity will offer curated proprietary owned brands, including packaging innovator Pollen Gear, VIBES rolling papers, Marley Natural Accessories; K.Haring Glass Collection, Aerospaced grinders, Eyce specialty silicone smoking products, and Higher Standards, an innovative retail experience with flagship stores in Chelsea Market, New York and Malibu, California. 

The C-CELL suite of products, currently sold exclusively by KushCo and other distributors in the US, will also become available to Greenlane’s B2B and B2C customer base.

Ultimately, the combined company is expected to have pro forma revenue of more than $250 million for 2020 and a pro forma market capitalization in excess of $350 million based on the respective share prices of Greenlane and KushCo as of March 30. Following the merger, the entity is expected to generate pro forma revenue of between $310 million and $330 million for 2021

KushCo CEO Nick Kovacevich will assume the same role in the combined company, and Greenlane’s Bill Mote will serve as CFO, the companies said. Greenlane co-founders Aaron LoCascio and Adam Schoenfeld will be President and Chief Strategy Officer, respectively. The combined company will be headquartered in Boca Raton, Florida with a significant footprint in Southern California.

“We’re excited to create a leading, innovative supplier of cannabis ancillary products serving the most valuable segments of the supply chain,” Kovacevich said in a statement.

“For more than 10 years, KushCo has proudly pioneered this industry, creating substantial value for our customers, employees, partners, and stockholders. Now, we have reached a critical time in our industry where the leading operators are increasingly looking to partner with companies in the ancillary space who can reliably support their rapid expansion for years to come. We greatly admire the product portfolio that the Greenlane team has built, and we are excited to work with them to cross-sell to our complementary customer bases and execute on the attractive growth opportunities ahead.”

KushCo’s stockholders will receive roughly 0.25 shares of Greenlane Class A common stock for each share of KushCo common stock, the company said. This is expected to result in KushCo stockholders owning approximately 49.9% of the combined company’s common stock and Greenlane stockholders owning the remaining 50.1%. The basic exchange ratio represents a 6.3% premium to KushCo’s 20-day volume weighted average closing price ending on March 30, 2021, the company said.

The merger lets Greenlane continue to pursue opportunistic and strategic priorities before the transaction closes, including acquisitions and capital raising transactions. If Greenlane issues securities in connection with any acquisitions or capital raises, the exchange ratio will be adjusted to ensure that Greenlane’s existing stockholders maintain an aggregate interest of at least 50.1%, but not more than 51.9%, in the combined company.: 

“This transformative transaction is expected to create a broad and complementary platform that we expect to deliver substantial synergies at an important inflection point in the cannabis industry,” LoCascio said. “As an industry leader, the combined company will be well positioned to grow profitability and maximize value for all stockholders while also providing enhanced product offerings and expanded ancillary services to our valued customer bases. We are thrilled to be working with the talented and experienced KushCo team, and together we will continue to drive innovation and excellence in the space. Since Greenlane’s founding in 2005, we have been at the forefront of the cannabis industry, and today we take the next step in our continued evolution.”

Contact Andrew Kessel at [email protected]

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Story by ProactiveInvestors