The Parent Company strikes agreements to expand supply of high-quality California grown cannabis

TPCO Holding Corp (The Parent Company) (NEO:GRAM) (OTCQX:GRAMF) announced a $50 million strategic investment in GH Group Inc through a private placement offering by Mercer Park Brand Acquisition Corp (NEO:BRND.A.U) (OTCQX: MRCQF), a special purpose acquisition company, which has struck a definitive agreement to merge with Glass House.

The San Jose, California-based company said the strategic investment is expected to close concurrently with the closing of Mercer Park Brand’s qualifying transaction. Parent Company has also struck a non-binding letter of intent with Mercer Park Brand for a cannabis biomass offtake and retail distribution agreement, which will enable Parent Company’s products to be sold in Glass House retail locations. The qualifying transaction is expected to close by the third quarter of 2021.

Glass House has a California greenhouse cultivation footprint of over 500,000 square feet, producing over 110,000 pounds of dry flower biomass per year. It also operates four dispensaries, and just announced two additional retail licenses in Santa Barbara county. Glass House has struck a deal to merge with 17 in-process retail licenses from Element 7, which is expected to bring Glass House’s retail footprint to 23 locations by the end of the first half of 2022.

READ: The Parent Company partners with Omura to launch new cannabis pre-filled paper cartridges, Caliva Flowersticks

“Parent Company’s retail partnership with Glass House will secure shelf space in all stores for its house of brands,” said the company.

In addition, the firm has signed a definitive binding agreement to acquire four acres of outdoor cannabis cultivation in California’s Sonoma County from a group of cannabis farmers, Mosaic.Ag, an affiliate of Soma Rosa Farms, for up to $17 million in cash and shares. The acquisition is expected to close in 2Q 2022.

“These partnerships are a fantastic opportunity to secure long-term access to over 900,000 pounds of high-quality, low-cost, California-grown cannabis for use across our expanding portfolio of branded products,” said Parent Company CEO Steve Allan in a statement.

“Our focus over the last 100 days has been to continue to scale up our supply chain. Our strategic investment accomplishes two important components, gaining access to Glass House’s greenhouse-grown cannabis at attractive pricing and expanding the distribution of our products to their network of retail stores.”

Allan noted that the company’s “vertical integration” strategy is aimed at locking up “long-term, low-cost cultivation” to meet demand for branded products in its wholesale and direct-to-consumer channels.

“With Glass House and Mosaic.Ag added onto to our existing large scale indoor grow, we will have successfully grown our cultivation foundation, setting us up to have a scale and margin advantage for years to come,” added Allan. “A retail partnership with Glass House is expected to continue to enable our brands to maximize consumer awareness and availability in California.”

Transaction details

Parent Company has struck an agreement to acquire 6.2% of subordinate voting shares of Mercer Park Brand on closing of its qualifying transaction with Glass House for $50 million in cash. In addition, Parent Company has entered into a non-binding letter of intent with Glass House to negotiate a 10-year, half-a-million pounds of cannabis biomass offtake agreement, and a nearly $25 million retail partnership deal over six years that enables Parent Company’s products to be sold across Glass House locations.

Parent Company has also agreed to acquire four acres of licensed high-quality outdoor cultivation from Mosaic.Ag for up to $17 million in cash and shares. “On executing the definitive agreement, the company advanced around $6 million in cash to the sellers, less a mutually agreed upon holdback amount, which amount will be repaid to the company if the acquisition does not close,” said the company.

When the transaction is completed, the company will pay the sellers $2.5 million in shares. “An additional share consideration of up to $8.5 million in aggregate may be paid to the sellers based on the sellers achieving certain specified revenue and profitability targets,” said the company.

Contact the author Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive

Story by ProactiveInvestors