Cannabist to sell Virginia assets to Curaleaf for $110M

Cannabist (CBSTF) announced that it has entered into an agreement to sell all of the ownership interests of its subsidiary engaged in the business of cultivating, producing, manufacturing, distributing and selling cannabis in the Commonwealth of Virginia to a subsidiary of Curaleaf (CURLF) for total consideration of $110M, subject to adjustment. The assets consist primarily of five active retail locations, one additional retail location in development, and approximately 82,000 square feet of cultivation and production capacity in the Richmond region. The company, Green Leaf Medical of Virginia, a subsidiary of the company and Green Leaf Medical, another subsidiary of the company and the sole member of gLeaf Virginia, entered into an equity purchase agreement with Curaleaf, Inc., a subsidiary of Curaleaf Holdings Inc. Pursuant to the EPA, the buyer will purchase all of the issued and outstanding equity interests of gLeaf Virginia from the member for total consideration of $110M, consisting of: $80M in cash payable at the closing of the transaction, $20M in cash as deferred consideration as well as a $10M promissory note issued by the buyer to the member or an affiliate thereof designated by the member prior to the closing, all subject to adjustment as described in the EPA. The promissory note will bear interest at a rate of 6% per annum, beginning on the closing date of the EPA, through maturity on the one-year anniversary of the closing date. The delayed payment will be payable within 30 days following the earlier of the date on which the first adult-use sale has occurred at each of the five gLeaf Virginia retail locations in operation and the one retail location under development in the Commonwealth of Virginia, and the date that is 12 months from the date on which the first adult-use sale has occurred at any of the retail locations. The principal amount of the promissory note is subject to downward adjustments for cash, working capital, indebtedness, and transaction expenses of gLeaf Virginia as well as for indemnification claims. Any unpaid indemnification obligations not settled against the promissory note may also be set off by the buyer against the delayed payment. The EPA includes a 15-business day go-shop period beginning on the date of the EPA and continuing until 11:59 p.m. Eastern Time on December 22, unless otherwise extended with the prior written consent of the buyer, during which time the company will, subject to the requirements and limitations set forth in the EPA, be permitted to, among other things, solicit, negotiate and enter into alternative proposals. The EPA includes a $3.3M break-fee that will payable should the company enter into an alternative proposal or should the company fail to receive noteholder consent. The transaction is subject to, among other things, satisfaction or waiver of certain closing conditions, including regulatory approvals and the consent from holders of a majority of the aggregate principal amount of the nine and one quarter percent senior secured notes due December 31, 2028 and the nine percent senior secured convertible notes due December 31, 2028 issued by the company. No shareholder approvals are required. The transaction is expected to close early in 2026 or before. The company expects to use a portion of the net proceeds from the transaction to redeem notes.