Canadian cannabis retailer ShinyBud Corp. (TSXV: SNYB) is broadening its business focus to the health and wellness markets by acquiring a pharmacy.
On Tuesday, the company announced it signed a binding letter of intent to acquire Cotton Mill Pharmacy for a total purchase price of $900,000. Cotton Mill has been operating since 2015 and is a fully independent no banner pharmacy located in Cornwall, Ontario.
The closure of the acquisition is subject to a number of customary conditions including definite documentation, the closing of the acquisition loan and regulatory approvals.
To finance the acquisition, ShinyBud received a term sheet for a $700,000 million secure acquisition 10-year term loan from Caisse Desjardins Ontario Credit Union Inc. at an interest of 5.5 per cent.
A portion of the price will be paid through a one-year vendor take-back loan of $100,000 at an annual rate of 4 per cent interest.
The company says it expects to pay the remaining balance in cash and there is no debt being acquired except the $700,000 being undertaken.
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CEO Kevin Reed said the broadening of the strategy is how the company will continue to differentiate itself from other retailers.
“We believe that the convergence of cannabis, health and wellness, pharmacies and medical care services is where the growth potential lies for ShinyBud, and that adding pharmacies to our corporate portfolio will bring benefits to both our customers and our shareholders. We plan on being an emerging leader in this sector,” said Reed in a statement.
CFO Jude Pinto said the company intends to target for acquisition independent retail Canadian pharmacies that offer attractive standalone economics in underserviced markets with the intention of leveraging its retail operating expertise to optimize the business and expand the pharmacy’s service and retail offerings.
“Our strategy is to acquire retail pharmacies with strong existing financial performance primarily using senior debt, with a view to minimizing dilution and maximizing shareholder value.”