Benzinga | Jun 25, 2021 08:41AM EDT

High Tide Focuses On U.S. Market As It Acquires Online Cannabis Accessories Retailer For $10M

High Tide Inc. (TSXV:HITI) (NASDAQ: HITI), via its U.S. subsidiary, will acquire 100% interest in DHC Supply LLC operating as Daily High Club in a $10 million stock and cash deal. Daily High Club is an online retailer of glass water pipes, vaporizers and other consumption accessories.

What Happened

The retail-focused cannabis company signed a definitive purchase agreement under which the total consideration to Daily High Club shareholders will be $10 million, consisting of $6.75 million in common shares of High Tide and $3.25 in cash.

The transaction is projected to close at the end of June, being subject to various customary closing conditions such as authorization of TSX Venture Exchange. It has already been unanimously approved by the boards of directors of both companies.

Why It Matters

The deal is immediately accretive since Daily High Club reported net revenue of $9.4 million and EBITDA of $1.2 million for the 12 months ending April 2021.

What also makes this transaction accretive are the new cross-selling opportunities presented through Daily High Club's consumption accessories subscription box model with more than 15,000 active monthly subscribers. High Tide also plans to include in its offering subscription box memberships via its e-commerce platforms Grasscity and Smoke Cartel.

The Calgary, Alberta-based company will further energize its online presence by obtaining access to Daily High Club's nearly 800,000 Instagram and more than 75,000 TikTok followers.

"In alignment with our intention to become a dominant player in the U.S. e-commerce marketplace through a combination of organic growth and accretive acquisitions, specifically targeting businesses with strong brand loyalty, I am thrilled to announce the acquisition of Daily High Club," Raj Grover, president and CEO of High Tide said. "Daily High Club stood out to us because it is an increasingly popular consumption accessories online retailer, with a rapidly growing subscription box model which can easily be tailored to include cannabis products in the event of U.S. federal legalization."

In addition, High Tide welcomed Harrison Baum as director of digital marketing to run all global social media activities for the company.

What's Next

With this acquisition, High Tide will significantly expand its cannabis retail network into the U.S. in the event of federal legalization via subscription boxes, e-commerce sites and new stores.

Price Action

High Tide's shares were trading 0.37% higher at $8.10 during Friday's pre-market session.

Photo by davide ragusa on Unsplash