Dixie Brands (DIXI.U) to merge with BR Brands in reverse takeover

reverse takeover
03/09/2020

Dixie Brands (DIXI.U.) signed an exclusive binding term sheet to merge with cannabis branding house, BR Brands, today. The deal will constitute a reverse takeover with BR Brands absorbing Dixie’s business in Q3 of this year to create one of the cannabis industry’s most comprehensive branding operations.

“BR Brands and its affiliates have had a long-standing relationship with Dixie, rooted in a deep respect for its platform and product portfolio. BR Brands was established to unite premium and emerging cannabis brands under one umbrella, offering unparalleled access to top-tier operating talent and capital expertise. With the consummation of this transaction, the resulting entity is poised to build upon our product portfolio, develop best-in-class IP and expand our geographic footprint, all while remaining laser-focused on continuing to meet the needs of our consumers,” said Andrew Schweibold, chairman of BR Brands.

BR Brands operating asset and infrastructure ranges through 11 states and Puerto Rico. They own Mary’s Brands, a cannabis product portfolio including the Mary’s Medicinals medical and topical brand and three California based brands, Defonce, Beeze and Rebel Coast. Dixie Brands made their early successes in the cannabis industry by embracing consumer packaged goods (CPG) principles, and focused on product development, distribution and marketing capabilities, leading to the company becoming one of the industry’s broadest ‘house of brands.’

“The challenges of the current cannabis related capital markets have guided Dixie to look for a strategic partner in order to solidify a platform we can leverage for long-term, stable growth for our shareholders. This strategic combination brings two of the most trusted and iconic brands together on one of the broadest manufacturing and distribution platforms in the industry. We are very pleased with the fundamentals of the deal as they will strengthen our balance sheet by decreasing debt, improving our cash position, and providing opportunities to enhance revenue growth and capture greater margin,” said Chuck Smith, president and CEO of Dixie.

Dixie’s portfolio brings brand names like Dixie, Synergy, AcesoHemp, Therabis and a strategic partnership with Herban Enterprises, which is an affiliate of the AriZona brand, to the reverse takeover.

Under the terms of the transaction, it is expected that:

  • The reverse takeover will come at a minimum valuation of $43,225,000, and convert $5 million of senior secured indebtedness owed by Dixie into subordinate voting shares of the new company, with a split that gives BR Brands 80% and Dixie shareholders 20% of the company.
  • All of the outstanding shares of the Resulting Issuer will be consolidated on the basis of one post-consolidation Resulting Issuer share for every 10 pre-consolidation Resulting Issuer shares or, if required to ensure compliance with the minimum listing requirements of the Canadian Securities Exchange, such other consolidation ratio as may be agreed upon by Dixie and BR Brands, each acting reasonably.
  • In anticipation of the entry by Dixie into strategic distribution, licensing or similar arrangements to permit BR Brands to manufacture and distribute Dixie products in the various territories in which BR Brands operates during the period from the date of the binding letter of intent until the execution of the definitive agreement, BR Brands will provide Dixie prepaid distribution, licensing or similar fees in an aggregate principal amount of up to $1,000,000.

The board of the merged companies will be compromised of three nominees from BR Brands and two from Dixie. Chuck Smith, the president and CEO of Dixie, will retail his position with the merged company, while Andrew Schweibold will serve as chairman of the board.

—Joseph Morton

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