Hightimes Holding Corp., the troubled company behind iconic High Times Magazine, has solidified its move into brick-and-mortar cannabis retail with the acquisition of 13 operational and planned California dispensaries from Harvest Health and Recreation.
The stock and cash transaction, worth about $80 million, entitles Harvest Health to a significant share in Hightimes as the media company-turned cannabis retailer pursues a long-awaited public offering. The companies expect the acquisition to close by June 30.
"We have enormous respect for the Harvest brand and look forward to ushering in the next generation of retail experience with Harvest as a significant shareholder in our company," Hightimes Holding Executive Chairman Adam Levin said in a statement.
The deal represents execution on a plan announced in January, to move the media and events company into cannabis retail. The company charged new CEO Stormy Simon, formerly president of Overstock.com, with leading the pivot to digital and brick-and-mortar commerce.
"We definitely want to step up our digital game, create a marketplace, things like that on our site, and then looking to maybe make a footprint in some retail stores," Simon told Cheddar at the time.
The company announced its intent to open flagship dispensary locations in Las Vegas and Los Angeles back in January. As of publishing, plans for those locations are still being finalized. But Tuesday's acquisitions grant Hightimes access to an expansive retail footprint "overnight." According to a release, the company plans to rebrand Harvest Health's existing shops "to fit the High Times aesthetic and experience." The shops will also bear the High Times logo.
For Harvest Health, the transaction offers the company a chance to cut costs and consolidate during a challenging time in the cannabis industry.
"This planned divestment of select retail assets in California allows Harvest to focus on optimizing operations and expanding assets in core markets such as Arizona, Florida, Maryland, and Pennsylvania while retaining a smaller retail presence in California" Harvest Health CEO Steve White said in a statement. "We will continue to examine the strategic value of our assets and streamline operations as we move toward achieving our profitability goals."
High Times' iconic role in cannabis culture and history hasn't saved it from problems plaguing the media and cannabis industries. In December, after a challenging year for cannabis, Hightimes Holdings disclosed in an SEC filing it may have to shut down operations due to "recurring operating losses, net operating cash flow deficits, and an accumulated deficit." In the preceding months, a spate of negative headlines foreshadowed the news. The company lost its chief financial officer of only three months amid a challenging initial public offering and laid off a majority of employees at subsidiary Dope Magazine.
However, things seem to have turned around for the company, which last month signed a letter of intent to acquire cannabis grower and processor Humboldt Heritage, and said Tuesday was in the final days of its IPO campaign.
Hightimes and Harvest Health's transaction comes at a turbulent time for the cannabis industry. After a difficult 2019 during which a health scare linked to illicit market vape products accelerated the slide of already crumbling cannabis capital markets, the coronavirus pandemic introduced an added dimension of difficulty for struggling companies.
Pandemic-related supply chain disruptions, changes in consumer spending and behavior, barriers to federal assistance, and new health and safety requirements have exacerbated challenges for already burdened companies that, deemed essential in many states, have been permitted to continue operating throughout the pandemic. Funding and M&A have all but ground to a halt, according to Viridian Capital Advisors, and experts predict many companies might not survive the next 12 months.
Should companies make it through the current obstacles, experts are bullish on the future of the cannabis industry overall, which data and analytics company BDS Analytics projects could be worth $47 billion globally by 2025.