Item 9 Labs Corp., an Arizona-based company that invests in marijuana-related businesses, signed an agreement to acquire Wild Card Cannabis, which includes Sessions Cannabis.
Sessions Cannabis is one of the largest franchise marijuana companies in Canada.
The total purchase price is $12.8 million (16.4 million Canadian dollars) in cash plus potential earnout payments, according to a regulatory filing.
Two earnout payments, the first due 12 months after the closing date and the second after 24 months, could add a total of $8.2 million in stock to the deal.
Among the conditions to close the deal is Item 9 Labs receiving financing.
Sessions has 43 stores in Ontario – the largest cannabis market in Canada – with annual sales exceeding CA$70 million from 18 franchisees, the companies said in a news release.
Most franchisees are multi-unit owners.
Ontario had 1,468 licensed cannabis stores open for business as of May 2, with hundreds more in the pipeline, raising concerns about a potential glut of retailers.
“We have amazing multi-unit franchisees and a solid franchise system that is dedicated to their success, but to further innovate within the industry and expand our reach, we need the right partner,” Sessions CEO and co-founder Steven Fry said in a news release announcing the deal.
“We believe we have found that with Item 9 Labs Corp. and their franchise brand, Unity Rd.”
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Phoenix-headquartered Item 9 Labs said the deal would add to its franchise system, called Unity Rd., consisting of over 20 partners who are developing more than three dozen stores across 10-plus U.S. states.
“We are serious about accelerating our growth and opening the doors for more prospective entrepreneurs to enter the complex cannabis space, and it is reflected in our merger and acquisition activity,” Item 9’s vice president of mergers and acquisitions, Mark Busch, said in the release.
“Acquiring one of Canada’s largest cannabis retailers is a great milestone for our team and demonstrates our ability to close large transactions.”
Last October, Item 9 Labs signed a deal to buy an unspecified licensed marijuana store in a Denver suburb for an undisclosed sum.
Item 9 said the store would become the company’s first corporate-owned outlet.