Grown Rogue Expands Stake in Michigan Cannabis Operations

April 25th, 2024 Business & Industry
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Grown Rogue International Inc. has recently enhanced its stake in its Michigan operations by increasing its ownership from 52.2% to 80%. The company executed this expansion through two key transactions, totaling a value of $2.8 million.

The financial structure of the deal included an upfront cash payment of $200,000, with the remaining $2.6 million covered through sellers' notes, repayable over four years. This acquisition targets the company's subsidiary, Golden Harvests, LLC, which oversees its Michigan facilities. These facilities boast an 80,000 square foot space, of which approximately 15,000 square feet is dedicated to the flowering of cannabis.

Further details of the transaction reveal a complex structure of ownership and investment. Grown Rogue's related entity, Canopy Management, LLC, currently holds a 60% interest in Golden Harvests. Notably, Canopy itself is 87% owned by Grown Rogue indirectly. As part of the agreement, Grown Rogue acquired the remaining minority interest in Canopy for $800,000. This payment plan includes a 20% down payment in cash and subsequent monthly payments over a four-year period at an interest rate of 5.2% per annum.

Additionally, Grown Rogue purchased a 20% minority stake in Golden Harvests directly for $2 million, agreeing to minimum quarterly cash payments across four years. This strategic move places Golden Harvests at a valuation of $10 million, reflecting its significant market potential. The company plans to fund these payments using its existing cash reserves and through cash generated from ongoing operations.

Moreover, Grown Rogue retains the option to acquire the final 20% of Golden Harvests, ensuring future control is based on fair market evaluations. It's noteworthy that Dave Pleitner, an insider at Grown Rogue, holds the minority interest in Golden Harvests, and certain directors of the company possess 8% interest in Canopy.

CEO Obie Strickler emphasized the strategic importance of Michigan to Grown Rogue, noting the state as a pivotal market where the company first demonstrated its operational capabilities beyond its original base in Oregon. He expressed enthusiasm about the increased ownership and discussed potential plans to further develop and maximize the facility's additional 25,000 square feet of space.

In response to these developments, Grown Rogue's shares saw an 8.9% increase so far today, trading at $0.71 per share, illustrating positive investor sentiment following the announcement of the expansion.

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