The Valens Company (VLNS), a leading manufacturer of cannabis products, has completed its acquisition of U.S. CBD company Green Roads and its manufacturing subsidiary. Florida-based Green Roads is a leading CBD health and wellness brand with an established manufacturing and distribution platform.
The Valens is paying $40 million for Green Roads, plus a contingent consideration of up to $20 million, payable when the purchased business meets certain profit targets. If all milestones are met in 2022, the transaction represents approximately 4.5 times the 2022 EBITDA.
This acquisition gives Valens a significant presence in the United States, the world’s largest cannabinoid market. It represents a significant step in the company’s international expansion strategy.
The Valens’ CEO, Co-Founder and Chair Tyler Robson said, “We expect to realize strong synergies and to aggressively pursue various strategic opportunities that are now available to our combined business through this transaction, including expanding the distribution of our ever-growing product offerings overseas and further disrupting the North American market with innovative cannabis products. The combination of Valens and Green Roads makes for an unbeatable team, diversified distribution network, and unparalleled product development and manufacturing platform, which we expect will provide us the footprint to become one of the biggest players in the global cannabis health and wellness market.”
Valens also expects that the acquisition of Green Roads will strengthen its position in the Canadian market with an expanded offering through the introduction of various CBD products from Green Roads. It plans to launch Green Roads products in the Canadian market in the second half of fiscal 2021. (See The Valens stock chart on TipRanks)
Two months ago, Desjardins analyst John Chu maintained a Buy rating on the stock with a price target of C$3.75. This implies 17.9% upside potential.
Chu said in a note, “We are encouraged that Valens was able to post a solid 1Q despite industry headwinds which caused many of its peers to recently post lower-than-expected revenue. And with several upcoming sales drivers, we have increased comfort that Valens should continue to generate strong sales growth going forward despite ongoing industry headwinds. Valens continues to be well-positioned in the cannabis 2.0 market and should remain a standout in both uncertain and more normalized market conditions.”
Overall, consensus among analysts is that VLNS is a Strong Buy based on 3 Buys and 1 Hold. The average Valens analyst price target of C$4.01 implies 26% upside potential to current levels. Shares have gained about 86% year-to-date.
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