Red White & Bloom Brands to Buy PharmaCo of Michigan

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Less than a week after inking a $35 million agreement to purchase California-based cannabis company Platinum Vape, Toronto’s Red White & Bloom Brands (RWB) announced Monday plans to acquire Michigan’s PharmaCo Inc.

In a news release, RWB said it had exercised its right to acquire 100% of PharmaCo via the company’s wholly owned MichiCann Medical Inc. subsidiary.

On January 4, 2019, MichiCann negotiated a put/call option agreement with PharmaCo shareholders, enabling it to acquire 100% of the company in exchange for 37 million common shares. At the same time, MichiCann also agreed to purchase up to $114.7 million worth of PharmaCo debt.

According to a recent filing, the call option was valued at C$20.6 million as of March 31, 2020.

“PharmaCo has established significant market share within the state of Michigan,” RWB chief executive Brad Rogers said via the release. “Now that we have completed our go public transaction, we felt that the time was right for us to take the next step of rolling our critical mass asset base together in what we believe is one of the top 3 most important cannabis states by market size and potential.”

RWB, which was formed via the combination of the Tidal Royalty Corp. and MichiCann, resumed trading on the Canadian Securities Exchange in June.

"This will simplify and streamline the structure of the company, more easily evidencing the overall underlying value of RWB for our shareholders and stakeholders,” Rogers added. “PharmaCo has worked very hard on building out these assets for the last 2-plus years and we believe it is time for us to enter this large and important market, taking advantage of PharmaCo’s early mover advantage."

A March 2020 study from the Michigan State University analyzing the potential economic impact of the state’s adult-use cannabis sector found that sales of marijuana products could reach $3 billion when the market fully matures.

The total economic impact, accounting for 23,700 people employed directly and indirectly as a result of an established legal cannabis market, could reach nearly $7.9 billion over the next five years.

Adult-use cannabis sales in Michigan began on December 1, 2019.

RWB currently has 660 employees and 168,000 sq. ft. of operating cannabis cultivation capabilities, according to its current investor presentation. 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.

RWB also recently struck a licensing deal with Hightimes Holding Corp., the corporate parent of popular pot publication High Times Magazine.

Additional information is available in RWB’s news release.


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