General Cannabis’ SevenFive Farms Acquisition Provides In-Roads to Colorado
February 7th, 2020
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Colorado cannabis sales hit $1 billion in total cannabis-related revenue in 2019, becoming the first state in the country to hit that milestone five years after legalization. In addition, Colorado has the highest per-person spending on cannabis at $280 per year, which is significantly higher than the $220 and $130 annual spend in Washington State and Oregon, respectively.
General Cannabis Corp. (OTCQX: CANN) recently signed a purchase agreement to acquire SevenFive Farms, a cultivation facility in Boulder, Colorado, to expand its operations into the state, marking another step towards building a network of mature cannabis business across Colorado, California, and eventually, Oregon.
Building a Foundation
SevenFive Farms operates a 17,000 sq. ft. light deprivation greenhouse cultivation facility that has been in place for over four years. Boulder is strategically located along the Front Range where it has easy access to Denver, Colorado Springs, Fort Collins and other major metro markets, as well as an easy path to mountain towns that draw tourists.
General Cannabis expects to improve production at the facility to approximately 300 pounds of flower per month, which could generate over $5 million in annual revenue and $3 million in positive contribution towards EBITDA. The product will be sold primarily to the wholesale market until the company adds retail operations to its larger business.
“This acquisition represents another step in executing our Cannabis 3.0 strategy,” says CEO Steve Gutterman. “We are acquiring a proven, successful facility. We will deploy Next Big Crop, our cultivation consulting business, to improve production over existing levels. And we will use the production from the facility to supply dispensaries as we add them.”
The all stock acquisition is pending approval from the Colorado state regulators (MED) and will close when the approval process is complete.
Cannabis 3.0 Approach
General Cannabis aims to capitalize on “second-mover advantage” by cherry-picking assets in mature markets and allocating capital efficiently and effectively to produce outsized returns. Rather than taking execution risk and starting from scratch, the company applies the expertise of its diverse team to find mature opportunities with lesser risk.
Prior to the purchase agreement with SevenFive Farms, the company announced a letter of intent to acquire Hälsa Holdings Inc., which has purchase agreements or letters of intent with three retail dispensaries in California. The acquisition will also add Chris Colón to the executive team, bringing a wealth of operational experience.
“We have painstakingly picked out marquee assets in California,” said President Chris Colón. “The assets we have under contract are excellent revenue-producing stores with extraordinary possibilities for expansion.”
Investors could see similar acquisitions over the coming quarters focused on mature opportunities in California, Colorado and Oregon where it can apply its expertise to expand revenue, improve profitability and ultimately add tangible EBITDA to its bottom line for shareholders.
Click the image to watch an exclusive interview with General Cannabis CEO Steve Gutterman and Hälsa Holdings CEO Chris Colón
With the pending Hälsa and SevenFive Farm acquisitions, General Cannabis Corp. (OTCQX: CANN) is executing on the Cannabis 3.0 strategy. The company is focusing on profitability and smart growth, and investors may want to take a closer look at the stock over the coming quarters as it grows its operational footprint in key U.S. markets.
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