BR Brands and Dixie Agree to Combine, Creating Market-Leading CPG Platform

Published: March 10, 2020

BR Brands and Dixie Agree to Combine, Creating Market-Leading CPG Platform

BR Brands LLC (“BR Brands”), a premier house of brands within the legal cannabis sector, and Dixie Brands Inc., have signed an exclusive, binding term sheet to merge. Under the terms of the deal, BR Brands will combine operations with Dixie by assuming the publicly traded platform via a reverse takeover. This transaction, expected to be completed by the third quarter of this year, will create one of the cannabis industry’s most comprehensive established house of brands.

BR Brands is the owner of Mary’s Brands, a portfolio of cannabis products that includes the acclaimed medical and topical brand Mary’s Medicinals®. BR Brands’ portfolio also includes three California based brands; Defonce, Beezle and Rebel Coast. With an ecosystem of operating assets and an infrastructure that currently spans 11 states and Puerto Rico, BR Brands is a market leader in geographic reach and product diversity.

“BR Brands and its affiliates have had a long-standing relationship with Dixie, rooted in a deep respect for its platform and product portfolio,” said Andrew Schweibold, Chairman of BR Brands. “BR Brands was established to unite premium and emerging cannabis brands under one umbrella, offering unparalleled access to top-tier operating talent and capital expertise. With the consummation of this transaction, the resulting entity is poised to build upon our product portfolio, develop best-in-class IP and expand our geographic footprint, all while remaining laser-focused on continuing to meet the needs of our consumers.”

Dixie Brands has been a pioneer and leader in the infused-cannabis industry since the launch of its iconic THC-infused Elixir in 2010. Recognizing early that the future of the cannabis industry lay in embracing CPG principles, the company focused on developing industry leading product development, production, distribution and marketing capabilities, leading to the creation of one of the industry’s broadest ‘house of brands’. The portfolio includes established brands such as Dixie™, Synergy™, AcesoHemp™, Therabis™ and a strategic partnership with Herbal Enterprises, LLC, an affiliate of the AriZona™ brand.

“The challenges of the current cannabis related capital markets have guided Dixie to look for a strategic partner in order to solidify a platform we can leverage for long-term, stable growth for our shareholders. This strategic combination brings two of the most trusted and iconic brands together on one of the broadest manufacturing and distribution platforms in the industry,” said Chuck Smith, President and CEO of Dixie. “We are very pleased with the fundamentals of the deal as they will strengthen our balance sheet by decreasing debt, improving our cash position, and providing opportunities to enhance revenue growth and capture greater margin.”

The Board of Directors of the merged company will be comprised of three nominees of BR Brands and two nominees of Dixie. Chuck Smith, President and Chief Executive Officer of Dixie, will become President and Chief Executive Officer of the merged company and Andrew Schweibold will serve as chairman of the board of the merged company. Unrelated to the deal and for personal reasons, Dixie’s Chief Financial Officer, Greg Robbins has resigned effective immediately. Dixie’s current Controller, Jared Lanser, will assume the role of interim CFO of Dixie.

Under the terms of the transaction, it is expected that:

  • BR Brands will complete a reverse takeover of Dixie at an implied valuation of Dixie of a minimum of $43,225,000 and will convert approximately $6 million of senior secured indebtedness owing by Dixie into subordinate voting shares of the entity resulting from the business combination (the “Resulting Issuer”), such that following completion of the transaction BR Brands and Dixie shareholders will own approximately 80% and 20%, respectively, of the Resulting Issuer.
  • All of the outstanding shares of the Resulting Issuer will be consolidated on the basis of one post-consolidation Resulting Issuer share for every 10 pre-consolidation Resulting Issuer shares or, if required to ensure compliance with the minimum listing requirements of the Canadian Securities Exchange, such other consolidation ratio as may be agreed upon by Dixie and BR Brands, each acting reasonably.
  • In anticipation of the entry by Dixie into strategic distribution, licensing or similar arrangements to permit BR Brands to manufacture and distribute Dixie products in the various territories in which BR Brands operates during the period from the date of the binding letter of intent until the execution of the definitive agreement, BR Brands will provide Dixie prepaid distribution, licensing or similar fees in an aggregate principal amount of up to $1,000,000 (the “Pre-paid Fees”).