High Tide (HITI.V; HITI.Q) announced they have entered into a definitive agreement pursuant to which High Tide USA, a wholly-owned U.S. subsidiary of High Tide, will acquire 100% of the issued and outstanding shares of DS Distribution Inc, operating as DankStop.com.
High Tide will spend $3.85 million USD to acquire DankStop, which will be paid out in HITI shares. Upon closing, DankStop will have ~ $100,000 USD in cash and ~$220,000 USD in non-cash working capital and inventory.
For high tide, the acquisition is, as the kids are saying, dank.
“This acquisition is yet another example of how High Tide’s U.S. e-commerce infrastructure and network keep getting stronger. Rolling multiple established e-commerce platforms into our network is positioning us nicely to create numerous synergies and efficiencies across our ecosystem. Along with this transaction, our last two acquisitions have increased High Tide’s social media reach by leaps and bounds, giving us access to an invaluable potential customer base,” said Raj Grover, President and CEO of High Tide.
“Being vertically integrated in the consumption accessories space and having access to the end consumer will continue to result in our ability to make meaningful high margin sales across all of our channels. Having already commenced online cannabis sales in three Canadian provinces, and already possessing an established customer network in place in the U.S. positions us well to commence online cannabis sales and cannabis subscription boxes in the United States if and when federally permissible. It is for these and many other reasons that I am delighted to welcome the DankStop team to the High Tide family of companies.”
As Grover notes, this DankStop acquisition is part of High Tide’s move towards vertical integration. HITI will immediately take ownership of DankStop’s more than 200,000 email subscribers and almost 335,000 Instagram followers, giving them access to channels of communications for new customers.
DankStop generated revenue over $3 million USD during the 12 months ended April 30, 2021, with an EBITDA margin in the “low double digits”.
This comes just a week after High Tide acquired 102105699 Saskatchewan, expanding their presence in the prairies. This acquisition will help them expand in both the online market and the US.
DankStop co-founder Feliks Khaykin and director Gabe Aronovich will be joining the High Tide team as a result of the acquisition, with Feliks taking on the role of Director of US Operations and Gabe coming on as Director of US Business Development.
“I’m truly excited to be joining the High Tide team and to begin overseeing High Tide’s U.S. business development initiatives,” stated Aronovich. “The synthesis of High Tide’s expansive e-commerce and manufacturing capabilities with DankStop’s vast subscriber base and social media presence will solidify High Tide’s position as the global leader in the online consumption accessory market, and I could not be more delighted to be part of the High Tide family.”
Following the news, High Tide shares on the TSX Venture are down 2 cents and are currently trading at $7.88.