- Purecan has a strong financial profile showcasing a December revenue run rate of approximately €15 million, with approximately 40% gross margins and 29% EBITDA margins.
- High Tide intends to leverage its Canadian Licensed cannabis procurement expertise, built on over $1.5 billion of the company’s cumulative cannabis sales since Canadian cannabis legalization, to build a significant, market-leading German medical cannabis business unit.
- High Tide continues to diversify into high-margin revenue streams within its ecosystem to further strengthen the company's innovative Canadian brick-and-mortar retail model, including through this highly accretive acquisition.
- With German medical cannabis sales increasing rapidly after the adoption of the Consumer Cannabis Act this past April, this acquisition provides a base for the company to expand into other European medical cannabis markets in due course.
[PRESS RELEASE] – CALGARY, Alberta, Jan. 13, 2025 – High Tide Inc., the high-impact, retail-forward enterprise built to deliver real-world value across every component of cannabis, announced that it is entering the fast-growing German medical cannabis market by signing a definitive agreement pursuant to which the Company will acquire 51% of Purecan GmbH for approximately €4.8 Million, and will have a future option to acquire the remaining interest in Purecan.
Purecan is a profitable, import-oriented pharmaceutical wholesaler based in Germany that holds a license to import medical cannabis into Germany and is preparing to launch a telemedicine portal for medical cannabis patients in Germany, along with complete warehousing and logistics infrastructure.
Germany is one of the world's largest importers of medical cannabis, with almost half of all imports coming from Canada. According to "The German Cannabis Report" released this past October by Prohibition Partners, a London-based data and market intelligence company, medical cannabis sales in Germany were expected to exceed €420 million this year and are on pace to reach €1 billion by 2028. The same report found that sales of medical cannabis in Germany had increased by 30% in the third quarter of 2023 and accelerated even further after the passage of Germany's Consumer Cannabis Act in April 2024.
Quotes
"I am thrilled to announce that High Tide is taking a significant step towards becoming a truly global cannabis company,” High Tide founder and CEO Raj Grover said. “By acquiring a 51% stake in Purecan, including its European wholesale and import license, its fully built warehousing and logistics infrastructure, and in-development telemedicine platform, we are strategically positioned to leverage our robust networks and relationships with Canadian licensed producers. With almost half of all German medical cannabis imports coming from Canada, this acquisition paves the way for us to emerge as a leading supplier of medical cannabis from Canada into Germany, potentially replicating our market share success in Canada.
"As I've said before, our German strategy is multipronged. This highly accretive acquisition provides immediate market entry into Germany while we explore opportunities for consumer research in collaboration with the Food and Drug Agency, aligning with the ordinance recently signed by Germany's Agriculture Minister.
"In addition to capitalizing on Germany's rapidly expanding medical cannabis market, the Purecan acquisition brings a company with strong cultural and operational alignment into the High Tide family. This alignment has been reinforced through months of in-depth collaboration and is reflected in Purecan's impressive financials, high margins, and lean operations. We anticipate this business unit will deliver a healthy margin profile, further strengthening our existing Canadian and international business lines.”
Purecan Chief Medical Officer Dr. Ehsan Omari said, “Since our very first meeting with Raj and the High Tide team a few months ago, it became apparent to us that there were significant cultural and operational alignments between our companies. Given that demand for medical cannabis in Germany is currently outpacing supply, this merger provides Purecan with a unique opportunity to tap into High Tide's unmatched procurement expertise and relationships with Canadian licensed producers who currently provide half of all medical cannabis imports into Germany. We look forward to a fruitful partnership between our two teams to create long-term value for all stakeholders involved.”
Transaction Details
The transaction, which is an arm's length transaction, is subject to, among other things, receipt of required TSX Venture Exchange (TSXV) approval, and other customary conditions of closing and is expected to close in the coming weeks. It implies an enterprise valuation of €9.5 million, representing three times the annualized adjusted EBITDA generated during the six months ended Dec. 31, 2024. The purchase price for the 51% acquired will be €4.8 million broken out as follows:
- €2.4 million in common shares of High Tide ("High Tide Shares") priced at the volume weighted average price per High Tide Share on TSXV for 10 trading days ending Jan. 7, 2025, of C$4.53 multiplied by the Bank of Canada's CAD to EUR rate as at Jan. 7, 2025, of 1.4871, for a total of 792,126 shares.
- €1.2 million in cash
- €1.2 million in a promissory note (the "Note"). The Note will mature two years after the closing date, bear 7% annual interest (paid quarterly), and be prepayable at any time by the company with no penalty.
In addition to the foregoing, Purecan's owners have agreed to grant High Tide an option to acquire the remaining interests in Purecan not held by High Tide, (the "Call Option"), at an enterprise value equal to the trailing twelve months of adjusted EBITDA multiplied by three. The Call Option will be exercisable at any time for a period of five years, following the 18-month anniversary of the closing.
In addition, High Tide has agreed to grant Purecan's owners an option to put to High Tide the remaining interests in Purecan not held by High Tide (the "Put Option"), at the same enterprise value as the Call Option during the same time period. The consideration under the Call Option or the Put Option, if exercised, will be satisfied in a combination of cash and High Tide shares, at High Tide's discretion.
Any High Tide Shares issued in connection with the transaction are subject to a statutory hold period of four months and one day.
