Newstrike Resources Ltd. (TSXV:HIP) creates a strategic alliance for the retail distribution of Up Cannabis products
SmallCapPower | May 25, 2018: Newstrike Resources Ltd. (TSXV:HIP) Wednesday announced that it has entered into a strategic investment agreement with Inner Spirit Holdings Ltd. According to the terms of agreement, both Newstrike Resources and Inner Spirit will acquire equity interests in each other, thereby entering into a companion strategic alliance agreement for the retail distribution of Up Cannabis products. Also, this deal would entail the creation and operation of Up Cannabis-branded customer lounges or ‘Experiential Hubs’ in each of Inner Spirit’s stores.
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Newstrike’s CEO Jay Wilgar said, “We believe this investment and strategic alliance have the potential to effectively elevate the profile of the Up Cannabis brand and increase consumer access to Up’s full line of cannabis and related products. We look forward to working with Spirit Leaf to enhance Up’s distribution reach and successfully building our businesses in a complementary and strategically aligned manner.”
Upon closing, Newstrike Resources will make a total investment of $2.25 million in Inner Spirit comprising $1,125,000 in cash and Newstrike common shares with an aggregate value of $1,125,000. The Newstrike common shares will be issued at a price of $0.90 equivalent to the five-day volume weighted average price (VWAP) calculated as at May 18, 2018. Also, Newstrike Resources will issue up to 1,125,000 warrants to purchase Newstrike common shares having an exercise price of $0.99, representing a premium of 10% to the issue price of the Newstrike Resources common shares, and a term of 24 months.
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Inner Spirit aims to leverage on its extensive franchise, marketing, real-estate and retail experience by setting up a chain of branded adult-use cannabis dispensaries across Canada under the ‘Spirit Leaf’ banner. To date, Spirit Leaf is the only Canadian retail cannabis company that has been granted membership into the Canadian Franchise Association and has over 100 franchises in various stages of development.
In addition, Inner Spirit will issue to Newstrike Resources, subject to approval of the Canadian Securities Exchange (CSE) and in accordance with the applicable securities laws, 15,000,000 units of Inner Spirit on the same terms as such securities are to be offered under Inner Spirit’s proposed initial public offering at a price of $0.15 per unit (one common share of Inner Spirit and one-half of a common share purchase warrant, exercisable at $0.30 per share for a period of two years following the date of issuance, subject to adjustment).
The closing of this transaction is anticipated to be before the closing of the proposed initial public offering of Inner Spirit’s common shares on the CSE. Newstrike Resources currently trades at market capitalization of $420.68 million with price-to-book multiple of 26.36x.
Disclosure: Neither the author nor his family own shares in the company mentioned above.
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