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by Bethan Rose
Medicine Man Technologies Inc., now known as Schwazze, just announced that it will be purchasing Southern Colorado Growers (SCG) in Huerfano County for $11.3 million. The money will be used to purchase the cultivator’s assets.
Based on the agreement, the Colorado-headquartered company will acquire 34 acres of land designated for cannabis growing. Included in the deal are a hoop house, indoor greenhouse, outdoor cultivation capacity, equipment, and cultivation facilities.
Under the terms of the proposed deal, Schwazze intends on paying $6.8 million for the business, and $4.5 million for farm and real estate assets. The deal’s $11.3 million valuation comprises $5.9 million in cash and $5.4 million worth of Schwazze common shares at closing.
The deal, which will assist Schwazze in expanding its business footprint across the State of Colorado, was confirmed following the signing of definitive documents outlining the planned transaction. It marks the company’s first foray into the cultivation segment — an area of the global cannabis market expected to reach $358.8 billion by 2027.
Customers who descend upon Schwazze’s Star Buds dispensaries will be able to get their hands on high-end, premium cannabis grown at SCG’s Colorado grow site. In addition to this, Schwazze’s acquisition of SCG will position the company to produce biomass for its cannabis extraction and manufacturing facility, PurpleBee’s.
Acknowledged as Colorado’s biggest supplier of wholesale distillate for the consumer packaged goods (CPG) market, PurpleBee’s provides concentrates, edibles, and vaporizer companies with premium cannabinoid-rich extracts.
Upon the deal’s anticipated closing in Q3 2021, Schwazze hopes to strengthen SCG with the expansion of new hoop house facilities; a task that is expected to take place over the next four quarters. SCG is recognized as a pioneer in premium flower production, with the cultivator priding itself on its award-winning selection of over 30 strains.
“This is just the beginning of our foray into the cannabis cultivation space. We believe our partnership with a premier cannabis cultivator such as SCG will provide our customers with premium quality flower in all of our 17 Star Buds Colorado locations,” said Schwazze CEO, Justin Dye. “In addition, this acquisition will dramatically increase our capability to produce a significant amount of biomass for our Purplebee’s MIP which, in turn, benefits the entire cannabis industry throughout the state. As a result of this net addition to our vertical integration, the acquisition of SCG is expected to provide a healthy positive margin impact for Schwazze.”
The acquisition’s closing is contingent on transaction-related conditions, such as local licensing and permit approvals. Once Schwazze builds the premier vertically integrated cannabis cultivation business in Colorado, the company hopes to broaden its operating system presence to other legal states where a diversified leadership position can be established.
Schwazze identifies itself as the parent company of a portfolio of trusted cannabis businesses and brands specializing in everything that the umbrella term “seed to sale” encompasses. The company is devoted to harnessing the therapeutic power of the cannabis plant to enhance the human experience.
The Schwazze team is committed to positively impacting local communities, practicing climate-conscious activities, and promoting diversity. Previously, the company traded under the name “Medicine Man Technologies, Inc.”. The name “Schwazze” was inspired by a pruning technique renowned for increasing yields and plant quality.
Company decisions and results are measured, tested, and driven through a combination of data science and customer-focused thinking. Each member of Schwazze’s leadership team maintains deep knowledge and expertise in consumer brand-building, retailing, and wholesaling at Fortune 500 companies. Additionally, many team members possess cannabis sector work experience.
Lending to Schwazze’s appeal as a leader in cannabis production is the company’s impressive financial results for its first quarter year, which concluded on March 31, 2021.
During the first quarter of 2021 (Q1 2021), Schwazze announced that it had finalized its acquisition of Star Buds and confirmed a Q1 2021 revenue increase of $19.3 million. In comparison with financial results recorded during the same period last year, when revenue surged $3.2 million, Q1 2020 delivered a 504% increase.
The company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to $5.8M for Q1 2021. Positive cash flow was also reported from operations of $1.7 million. Comparatively, last year’s loss was $2.5 million.
Looking ahead, Schwazze’s latest cannabis grow site acquisition will likely reflect future financial results.
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