Red White & Bloom Brands to Acquire Platinum Vape for $35 Million

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Red White & Bloom Brands (RWB) announced Wednesday the signing of a letter of intent to acquire California-based Platinum Vape, which makes and markets a range of cannabis products including extracts and edibles.

According to a news release, RWB will pay $35 million for Platinum Vape, whose current revenue run rate exceeds $70 million.

Platinum Vape also boasts 25% — 30% EBITDA margins, implying that RWB paid as much as 2x earnings for the marijuana.

However, RWB also agreed to a $25 million earn out with the owners of Platinum Vape, which could raise the multiple to about 3.5x if the California cannabis firm achieves certain financial milestones.

Under the terms of the proposed deal, RWB will pay Platinum Vape $7 million upon the closing of the transaction, which is expected to occur in September. RWB will pay an additional $13 million within 120 days of the closing and issue a 12-month, $15 million convertible note that is payable on the third anniversary of the closing.

As structured, the purchase allows RWB spread out its spending and keep the founders of Platinum Vape — father and son team George and Cody Sadler — driving the business forward.

“Cody and I have been building the business for nine years so far and feel that RWB is the best place to continue not only the growth of PV for us, but for our family as well,” the elder Sadler said via the release. “We couldn’t be happier with our decision.”

For his part, RWB chairman and CEO Brad Rogers called the Sadler entrepreneurs “visionaries in the cannabis market” and said the acquisition would “add tremendously” to both its top and bottom lines.

“As part of the RWB family, I look forward to supporting the growth of Platinum and the tradition of excellence established by Platinum and the incredible people that have made them a success,” Rogers said via the release.

The Sadlers launched their business out of a garage in 2012 with money raised from the sale of two used dirt bikes on Craigslist. They learned how to grow their first cannabis crops by watching videos on YouTube, and after a successful initial harvest launched a medical marijuana delivery service in the San Diego area.

In 2016, the pair pivoted from retail delivery to manufacturing oil and vape cartridges, scaling the business over the coming years to about $70 million in annual sales and nearly 200 employees.

The company’s products — including vapes, chocolates, gummies, packaged flower and pre-rolls — is sold at over 700 retailers in Michigan, California and Oklahoma, according to a release. The company has also eyes expansions in Arizona and Nevada, according to recent reports.

For its part, RWB — which was formed via the combination of the Tidal Royalty Corp. and MichiCann companies, and began trading on the Canadian Securities Exchange in April — seems poised for rapid expansion.

In a July 15 investor presentation, the company said it is “quietly building the monster of the Midwest.” RWB currently has 660 employees and 168,000 sq. ft. of operating cannabis cultivation capabilities. An additional 1.4 million sq. ft. of cultivation space is in the works, and the company also owns a 3.6 million sq. ft. hemp greenhouse in Illinois.

Prior to announcing the planned purchase of Platinum Vape, RWB inked a licensing deal with Hightimes Holding Corp., which owns the popular High Times Magazine founded in 1974 and is currently trying to pivot toward a plant-touching business model.

RWB traded $15 million worth of stock and agreed to a cash royalty payment of $10.75 million over 18 months for the right to brand 18 planned and operational cannabis dispensaries in Michigan, Illinois and Florida as “High Times” stores. The company was also granted the ability to commercialize High Times-branded cannabis products in those three states, and CBD products throughout the U.S.

RWB has raised a total of $142 million to date, according to its deck, and plans to operate 35 dispensaries by the fourth quarter of this year. It is projecting EBITDA of $57.5 million on $166 million of revenue in 2020.

Additional information is included in the release below.

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Red White & Bloom Brands Signs Binding Letter Of Intent To Acquire 100% Of Platinum Vape

Platinum is a premium cannabis brand with a current annualized revenue run rate in excess of US $70,000,000 with EBITDA between 25%-30% without forward synergies of an additional estimated 7%-10%

Platinum Vape products, including vapes, packaged flower, edibles and pre-rolls are sold at over 700 retailers in Michigan, California and Oklahoma

TORONTO — Red White & Bloom Brands Inc. (CSE: RWB and OTC: RWBYF) (“RWB” or the “Company”) is pleased to announce that it has signed a binding letter of intent (the “LOI”) to acquire a group of California-based companies operating under the name Platinum Vape (“Platinum Vape” or “Platinum”) with an expected closing in the current quarter.

The acquisition of Platinum Vape is the first acquisition by RWB since going public and also marks RWB’s entry into California, furthering the Company’s strategic plan of expansion. Platinum Vape are purveyors of a full product line of premium cannabis products sold at over 700 retailers throughout Michigan, California and Oklahoma boasting an 84% rating (4.2/5) on WeedMaps.com.

Platinum was started 9 years ago by father and son duo, George and Cody Sadler. Fresh out of college, Cody convinced his Father to embark on what has become a storied journey ever since. Based on the principles of quality, hard work and customer service, they grew the business with no outside investors into one of the most successful and storied brands in the space today. With the success came numerous media stories and appearances with some of the most notable pieces being:

Blazing Sadlers: The Incredible True Story Of A Cannabis Family (GreenentrEpreneur.com)

George Sadler Cofounder Of Platinum Vape Gets Gnarly With 5 Questions (Forbes.com)

This ‘Band of Brothers’ Works Together to Channel Cannabis Profits to Wounded Veterans (LeafReport.com)

Family-run Platinum Strikes Gold in the Cannabis Market with Financial Discipline (NewCannabisVentures.com)

Brad Rogers, Chairman & CEO of RWB, commented: “George and Cody, the founders and operators of Platinum Vape, are visionaries in the cannabis market and have done an incredible job in building the pre-eminent vape company in the United States through commitment to quality, education, and the communities they serve. One of the things that struck me is the balance they have achieved in running a profitable successful business, which will add tremendously to RWB's top and bottom lines, while maintaining their commitment to supporting social issues, both financially and through awareness with the REACT program they established. As part of the RWB family, I look forward to supporting the growth of Platinum and the tradition of excellence established by Platinum and the incredible people that have made them a success.”

George and Cody Sadler, Founders of Platinum Vape, commented: “We at Platinum Vape are excited to have done such an amazing deal to integrate PV into the RWB family.  Cody and I have been building the business for nine years so far and feel that RWB is the best place to continue not only the growth of PV for us, but for our family as well. We couldn’t be happier with our decision.”

The Platinum Vape Family

Vape Cartridges

Platinum Vape offers a wide range of disposable and reusable vape cartridges as well as pods in a variety of strain-specific flavors and effects.

Chocolates

Platinum Vape’s cannabis-infused chocolates are carefully crafted, palate driven creations that check all the right boxes. By combining the skills of a sophisticated chocolatier with seasoned cannabis experts, they were able to create a multi-faceted high that satisfies both your experience and your taste buds.

Gummies

Platinum Vape’s Gummy Coins are not your average infused treat. Meticulously crafted on candy traditions of its German origins, each uniquely flavored gummy provides a delightfully chewy experience. Their reusable tins are filled with 20 Gummy Coins that contain 5mg THC, thus promoting convenience and portability.

Packaged Flower and Pre-rolls

Platinum Vape’s indoor grown cannabis flower is cultivated to an unprecedented level of perfection. Their farming partners are masters at their craft to ensure cannabis flower that is unprocessed, pesticide-free, and lab tested. The traditions of growing, cutting, drying and curing are never rushed resulting in optimal consistency and high-potency cannabis. Available in both jars and pre-rolls, we categorize our strains under three effects: Indica, Sativa and Hybrid.

In the Community

Platinum uses its products to support a variety of social causes. Its REACT vape line uses the same cartridges and oils as its Platinum Vape products, but a portion of the proceeds goes to different charities. Thus far, the company has worked with organizations that support animal rescue, breast cancer awareness, suicide prevention, veterans, children’s hospitals, world hunger and LGBTQ pride.

Terms of the Transaction

Under the terms of the LOI, RWB and the securityholders of Platinum Vape will enter into a definitive agreement (the “Definitive Agreement”) pursuant to which RWB will acquire all of the ownership interests in Platinum Vape and Platinum Vape will become a wholly owned subsidiary of RWB in exchange for a total cash payment of US$35 million, consisting of US$7 million in cash payable at closing, a further US$13 million in cash payable within 120 days of closing and a US$15 million convertible note, only convertible after 12 months, payable on the third anniversary of closing. Additionally, the selling securityholders of Platinum Vape will be entitled to receive up to a further US$25 million on the first anniversary of closing, contingent on Platinum Vape achieving certain financial milestones.

Entering into the Definitive Agreement and closing of the transaction are conditional on satisfactory due diligence as well as other conditions customary in transactions of this nature, including receipt of regulatory approvals. The Company expects to sign the Definitive Agreement in August and close the transaction in September of 2020.

About Red White & Bloom Brands Inc.

The Company is positioning itself to be one of the top three multi-state cannabis operators active in the U.S. legal cannabis and hemp sector. RWB is predominately focusing its investments on the major US markets, including Michigan, Illinois, Massachusetts, California, and Florida with respect to cannabis, and the US and internationally for hemp-based CBD products.

About Platinum Vape

Platinum Vape is a conglomeration of cannabis companies with a passion to perfect an oil that is powerful, consistent, and desirable. It all begins with selecting the finest plants for extraction. Platinum Vape’s farming partners are masters at their craft, ensuring a pesticide-free, high-potency cannabis flower. With its core values of honesty and transparency, Platinum Vape takes pride in bringing their superior range of products to its family of consumers in Michigan, Oklahoma and California.


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