High Tide Closes Acquisition of Leading CBD E-Commerce Retailer FABCBD

Published: May 12, 2021

High Tide Closes Acquisition of Leading CBD E-Commerce Retailer FABCBD

High Tide Inc., a retail-focused cannabis corporation enhanced by the manufacturing and distribution of consumption accessories, is pleased to announce that it has completed the acquisition of Fab Nutrition, LLC, operating as FABCBD thus meaningfully increasing its presence within the U.S. e-commerce marketplace for hemp-derived CBD products. The acquisition is just one of a series of recent steps the Company has taken to considerably expand its footprint in the United States market by selling products that are already federally permissible, and demonstrates that High Tide can drive profitability without having to wait for federal cannabis legalization.

The Acquisition was completed pursuant to the terms of the definitive agreement previously announced by the Company on May 3, 2021, pursuant to which High Tide has acquired 80% of FABCBD for US$20.64 Million (the “Transaction“) and has been granted a three-year option to acquire the remaining 20% of FABCBD at any time.

The consideration for the 80% of FABCBD which is being acquired by High Tide is comprised of: (i) 15,154,09 common shares of High Tide (“High Tide Shares“) valued at US$8.08 Million (the “Share Consideration“) on the basis of a deemed price per High Tide Share of $0.648, being equal to the volume weighted average price per High Tide Share on the TSXV for the 10 consecutive trading days preceding the closing of the Transaction (“Closing“); and (ii) US$12.56 Million in cash (collectively with the Share Consideration, the “Consideration“). The cash portion of the Transaction has been funded entirely with cash on hand. In addition, pursuant to the Acquisition Agreement the vendor may be entitled to an earn out bonus of US$612,000 in the event that FABCBD exceeds gross revenues of at least US$13,500,000 in 2021, which will be paid, if due, in High Tide Shares based on the volume weighted average price per High Tide Share for the 10 consecutive trading days preceding payment, subject to a maximum of 1,425,106 High Tide Shares. To date, upon Closing, FABCBD has approximately US$500,000 of cash and non-cash working capital and inventory of approximately US$550,000.

In addition to the foregoing, as per the terms of the Acquisition Agreement, FABCBD has granted High Tide an option to acquire all the remaining shares in FABCBD not held by High Tide, thus allowing High Tide to become the sole shareholder of FABCBD (the “Call Option“), at an enterprise value equal to the trailing twelve months of EBITDA multiplied by six. The Call Option will be exercisable at any time for a period of three (3) years from Closing. In addition, High Tide has agreed to grant FABCBD’s founder an option to put to High Tide, the remaining shares in FABCBD not held by High Tide (the “Put Option“), at the same enterprise value of the Call Option. The Put Option will be exercisable by FABCBD’s founder for a period of two (2) years following the first anniversary of Closing. The consideration under the Call Option or the Put Option, if exercised, will be satisfied in High Tide Shares, on the basis of a deemed price per High Tide Share equal to the volume weighted average price per High Tide Share on the TSXV for the 10 consecutive trading days preceding closing of the Call Option or the Put Option, as the case may be.

Pursuant to the Acquisition Agreement, 9,679,778 High Tide Shares, equal to 25% of the Consideration has been placed in escrow for a period of up to 24 months from Closing, with releases scheduled every six months. Bayline Capital Partners Inc. (“Bayline“) and KPMG LLP served as High Tide’s advisors in connection with the Transaction. In connection with the Transaction, the Company has agreed to pay Bayline, an arm’s length party, an advisory fee equal to 3% of the Consideration, 50% in cash on Closing, and 50% in High Tide Shares, being 462,711 High Tide Shares.

The High Tide Shares issued for the acquisition of FABCBD and to Bayline are subject to a statutory hold period of four months and one day. Furthermore, High Tide granted 950,000 stock options (the “Options“) to Josh Delaney, founder and CEO of FABCBD (750,000) and an employee of High Tide (200,000), exercisable at $0.60 per High Tide Share for a period of three years.

ABOUT FABCBD
Fab Nutrition, LLC is one of the leading online retailers of hemp-derived CBD products. The company provides a marketplace with a wide variety of high-quality products and formulas, affordable pricing, rapid dependable shipping, and surprisingly personable customer service. The company’s website at www.fabcbd.com.

ABOUT HIGH TIDE
High Tide is a retail-focused cannabis company enhanced by the manufacturing and distribution of consumption accessories. The Company is the most profitable Canadian retailer of recreational cannabis as measured by Adjusted EBIDTA,[1] with 85 current locations spanning OntarioAlbertaManitoba and Saskatchewan.

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