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Canadian firms SNDL and Valens are merging in a CAD138m deal that aims to establish one of Canada’s largest adult-use cannabis manufacturers and retailers and a global leader in cannabis products.
Calgary-based SNDL is Canada’s largest private sector liquor and cannabis distributor and retailer. It is also a cannabis producer that supplies wholesale and retail customers under a portfolio that includes the brands Top Leaf, Sundial Cannabis, Palmetto, Spiritleaf Selects, and Grasslands.
Based in British Columbia, Valens has a research and analysis facility that develops white-label cannabis products including vape cartridges, beverages, capsules and tinctures.
The combined company will operate as SNDL and offer a portfolio of branded products to consumers in Canada through its own supply and distribution channels, which include 185 cannabis stores operating under the Spiritleaf and Value Buds banners.
SNDL’s CEO Zach George said the combined diverse brand portfolio, extensive retail footprint, low-cost biomass sourcing and cultivation and manufacturing facilities would create one of Canada’s largest adult-use cannabis manufacturers and retailers. Its retail insight and financial strength would enable the new SNDL to adapt quickly to emerging trends and become a leader in the Canadian regulated products sector.
SNDL said the combination of its own cannabis cultivation operations with Valens’s low-cost procurement capabilities would enhance its own product line and enable it to offer a wide range of customised products and pricing flexibility to retail partners.
Creating a global leader
“SNDL’s existing consumer packaged cannabis business will be transformed by Valens’s high-quality extraction, processing, and manufacturing capabilities and aligns well with our strategic vision to delight consumers with a full range of quality cannabis products and experiences,” said George. “Our companies have been commercial partners since Canadian legalisation.”
SNDL estimates that the integration of Valens’s product suite into its portfolio will increase its overall cannabis market share to 4.5% and its 2.0 product formats market share to 5.2%, which will make it a top ten player in both categories.
Valens CEO Tyler Robson also highlighted the two firms’ complementary assets, which he said would help the firm grow into a global leader in cannabis.
“Valens is one of the fastest growing branded cannabis companies in Canada, with a focus on innovation and investing in low-cost automated manufacturing assets,” said Robson. “With SNDL’s exceptional balance sheet and largest cannabis retail network in Canada we look forward to taking Valens’s brands to new heights.
“We believe the pro forma company provides investors with attractive exposure not only to the highest revenue generating cannabis company in Canada, trading well under its tangible book value, but also a dominant platform that can become a global leader in cannabis.”
The combination of the two firms is also expected to deliver more than CAD10m of annual cost synergies. Together with incremental revenues from greater distribution of Valens products, it is estimated that the transaction will deliver upwards of CAD15m of additional earnings before interest, taxes, depreciation, and amortization (EBITDA) on an annual run-rate basis through synergies and other strategic initiatives.
– Lorraine Mullaney CBD-Intel staff
