Ayr Wellness (AYR.A.C) announced a definitive purchase agreement to acquire Tahoe Hydroponics Company and NV Green.
Tahoe Hydro operates ~33,000 square feet of cultivation and manufacturing space in their facilities in Carson City and Sparks, Nevada, where they grow flower and produce concentrates Tahoe Hydro and Lost in Translation (LIT). These brands are some of the top-selling products in Nevada, and Tahoe also provides flower for the Cookies brand. Despite the size of their cultivation facilities, Tahoe pays close attention to their product, which is hand-picked, vine cured, and hand-trimmed, with their signature Tahoe Hydro cannabis undergoing 550 quality control checks.
Ayr intends to purchase a 100% interest in Tahoe Hydro for a total consideration of $17 million. This purchase will include $5 million in cash, $3.5 in debt and $8.5 million in stock. Based on their current estimates, Ayr believes they are paying ~four and a half times Tahoe Hydro/NV Green’s combined 2021 Adjusted EBITDA.
“The Tahoe Hydro acquisition perfectly encapsulates Ayr’s strategy. We seek to be the largest scale cultivator of high-quality cannabis in every market where we operate. Tahoe Hydro has demonstrated time and time again its ability to produce flower that meets the exacting standards of quality that Ayr sets throughout its organization. We could not be more excited to bring their talented team of cultivators into our organization and add their impressive flower to our Nevada wholesale and retail offerings,” stated Jonathan Sandelman, CEO of Ayr.
By bring Tahoe Hydroponics into the fold, Ayr is significantly increasing their cultivation capacity. The acquisition will add significant cultivation talent to Ayr’s already robust cultivation team, including 75 employees, which they plan to deploy both within Nevada and across the US. They believe it will allow them to have increased availability and selection for their products in retail stores and allow them to expand their wholesale in the Nevada market.
In 2020, cannabis sales in Nevada topped $684 million USD, even after the COVID-19 lockdowns slumped the sale of cannabis significantly. A considerable amount of cannabis sales in Nevada come from tourists, so with tourism in Las Vegas picking back up, cannabis sales in Nevada see impressive growth. Even without tourists, back in January 2021 cannabis sales were up 30% year-over-year for that month. Ayr could benefit from increasing their presence in a growing market.
Following today’s news, Ayr shares are down $1.20 and are currently trading at $35.07.