Australis Capital Inc. (OTC: AUSAF) has completed the acquisition of a 51% ownership interest in ALPS in a deal valued at $12 million, which consisted of $10 million in shares and $2 million in cash. Australis has the option to acquire the remaining 49%. Former Aurora Cannabis founder (NYSE: ACB) Mr. Terry Booth has been named CEO, effective immediately. Former MedMen alumni Dr. Duke Fu, who had been serving as the company’s Interim CEO since November 2020 will remain on the AUSA board of directors. Thomas Larssen, founder of ALPS, will remain as President of ALPS.
Green Market Report CEO Debra Borchardt hosted a Club House event on Wednesday evening featuring Booth with added commentary from Dr. Fu. At the event, Booth said the company was planning on changing its name from Australis. Despite his Canadian bona fides, Australis will be focused on the U.S. market. He also noted that even though Australis employed former Aurora Cannabis employees, that AUSA was not an “Aurora 2.0”.
ALPS is best known as a leader in facility design, construction management, and (post) commissioning services to the horticultural sector across a wide variety of commercial crops. The original name was Aurora Larssen Project, shortened to ALPS and the Aurora connection no longer remains. Booth explained that in the early days of Aurora, he met Larssen and was so impressed he jumped to secure his expertise for the company. Now with Aurora out of the picture he can expand that knowledge to others in the cannabis industry by creating low-cost facilities.
ALPS is expected to bring material revenues to Australis and is also anticipated to be immediately accretive to AUSA results. The company said that in the past two months alone, ALPS has signed a number of agreements with a total contract value in excess of $5 million. The majority of the work related to these contracts is anticipated to be completed in fiscal 2021 and 2022, with additional revenues extending beyond this period from recurring-revenue service contracts. Working capital upon close is expected to be approximately $1.5 million.
“With the completion of the ALPS transaction, AUSA has now been transformed into a revenue-generating company with a difficult to imitate multi-state expansion strategy in the U.S. cannabis market,” said Booth. “This transaction puts AUSA in a position where it can pursue novel streaming deals to fuel the scaling up of its high-quality brands across the nation, while delivering a de-risked income stream from a diversified services portfolio. We made a number of promises to our shareholders, and we are delivering on these, rapidly. I look forward to continuing a high-frequency dialogue with our stakeholders as we continue to execute and grow the Company.”
The company said that approximately 64% of the acquisition price is tied to significant top-line revenue and EBITDA targets, reflecting the confidence of the ALPS management team to profitably expand the business. Revenue targets range from $26.1 to $46.6 million. Corresponding EBITDA targets are $11.7 to $21.0 million. The targets are date driven, ranging from 12 to 54 months, and will be paid out in equity or cash at the discretion of the company.
Thomas Larssen, President of ALPS, added, “We are very pleased to now be part of AUSA, providing ALPS with additional market access to drive our growth. We see numerous growth catalysts for ALPS and AUSA both within the cannabis industry and in more mature horticulture sectors. I look forward to continuing working with Terry, Duke, Jon, and the rest of the AUSA team as we continue to strengthen our brand across the globe.”
Along with the acquisition comes the iconic west coast brand Mr. Natural. Founded by Bob “Natural” Luciano, an Ordained Rastafarian Priest, Vietnam War Veteran, and a master of organic cannabis cultivation, Mr. Natural is a multiple award-winning (LA Gem Cannabis Cup and High Times Cannabis Cup) medical and recreational brand that originated in California in the 1970s to treat veterans of the Vietnam war suffering from post-traumatic stress (PTS). Mr. Luciano has worked closely with the U.S. Department of Veterans Affairs and has been one of the key drivers to help create a platform within this federal agency to help educate Veteran Health Administration (VHA) officials on the benefits of cannabis.
AUSA said it intends to scale up the Mr. Natural brand across its operations in multiple jurisdictions, leveraging its capital-light strategy, enabled through the acquisition of ALPS. Veterans deserve access to cannabis as many studies support its positive outcomes in treating PTSD. Combining select cultivars along with therapy helps our veterans sleep, eat and deal with PTSD in a manner that is safe and proven.
Booth said, “I have known Bob “Natural” Luciano since 2015 when I did what I call “my pilgrimage” into the legalized cannabis industry, which was strictly medical at the time. I myself got into the space because I regarded it a noble and global pursuit, and Bob is one of the key people I met on my journey that helped cement my conviction to help provide fair access to cannabis, initially for medical and subsequently for recreational use. Bob is one of the most genuinely authentic and most knowledgeable operators in the sector, which is reflected by how his brands resonate with connoisseurs and patients alike. Through ALPS and with the expected completion of the GT transaction, we have a strong foundation to help bring the Mr. Natural products to consumers and PTSD patients across the U.S. and beyond.”
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