Acreage Announces Operational Update to Drive Improved Margins and Returns
NEW YORK, May 18, 2020 (GLOBE NEWSWIRE) — Acreage Holdings, Inc. (“Acreage” or the “Company”) (CSE: ACRG.U) (OTCQX: ACRGF) (FSE: 0VZ) today announced the sale of certain non-core assets as part of an update to its overall strategic plan to focus on key, profitable operations. The Company expects this shift in focus will lead to immediate margin improvements and accelerate its pathway to achieve positive pro-forma adjusted EBITDA for the full year 2020.
The strategic shift is a direct response to significant changes in capital markets, and in anticipation of continued historic pressure on consumer sentiment and regional and national economic uncertainties. In addition to the sale of some non-core and other under-performing assets, Acreage intends to operate with a more optimized overhead cost structure and corporate team to adapt to an ever-changing cannabis landscape.
The impact of the COVID-19 pandemic on U.S. cannabis operators has been profound, at a time when the industry was already reeling from decreased access to capital, legislative uncertainty, and the illicit-market vaping crisis that struck our industry by association.
Kevin Murphy, Chairman and CEO of Acreage
Led by a nimble operating team and Board of Directors that has proven its ability time and again to adapt and thrive in challenging times, we are supremely confident our plan will ensure operational profitability and excellence and position us to deliver improved shareholder returns in short order.
Based on anticipated potential operational changes, the Company expects to record a pre-tax, non-cash charge of $80 to $100 million in the quarter ending March 31, 2020. The Company expects to report improved margins in 2020 through additional operational optimization efforts, accelerating its pathway to profitability to achieve positive pro-forma adjusted EBITDA for the full year 2020.
To date, Acreage has already taken the following actions in support of this new focused strategy:
- Divested undeveloped real estate in Nantucket
- North Dakota: Divested Acreage North Dakota, LLC, which operated one medical cannabis dispensary
Headquartered in New York City, Acreage is a vertically integrated, multi-state operator of cannabis licenses and assets in the U.S. Acreage is dedicated to building and scaling operations to create a seamless, consumer-focused branded cannabis experience. Acreage debuted its national retail store brand, The Botanist in 2018 and its award-winning consumer brands, The Botanist and Live Resin Project in 2019.
On June 27, 2019 Acreage implemented an arrangement under section 288 of the Business Corporations Act (British Columbia) (the “Arrangement”) with Canopy Growth Corporation (“Canopy Growth”). Pursuant to the Arrangement, the Acreage articles were amended to provide Canopy Growth with an option to acquire all of the issued and outstanding shares in the capital of Acreage, with a requirement to do so, upon a change in federal laws in the United States to permit the general cultivation, distribution and possession of marijuana (as defined in the relevant legislation) or to remove the regulation of such activities from the federal laws of the United States (the “Triggering Event”), subject to the satisfaction of the conditions set out in the arrangement agreement entered into between Acreage and Canopy Growth on April 18, 2019, as amended on May 15, 2019 (the “Arrangement Agreement”). Acreage will continue to operate as a stand-alone entity and to conduct its business independently, subject to compliance with certain covenants contained in the Arrangement Agreement. Upon the occurrence or waiver of the Triggering Event, Canopy Growth will exercise the option and, subject to the satisfaction or waiver of certain conditions to closing set out in the Arrangement Agreement, acquire (the “Acquisition”) each of the Subordinate Voting Shares (following the automatic conversion of the Class B proportionate voting shares and Class C multiple voting shares of Acreage into Subordinate Voting Shares) in exchange for the payment of 0.5818 of a common share of Canopy Growth per Subordinate Voting Share (subject to adjustment in accordance with the terms of the Arrangement Agreement). If the Acquisition is completed, Canopy Growth will acquire all of the Acreage Shares, Acreage will become a wholly owned subsidiary of Canopy Growth and Canopy Growth will continue the operations of Canopy Growth and Acreage on a combined basis. For more information about the Arrangement and the Acquisition please see the respective information circulars of each of Acreage and Canopy Growth dated May 17, 2019, which are available on Canopy Growth’s and Acreage’s respective profiles on SEDAR at www.sedar.com. For additional information regarding Canopy Growth, please see Canopy Growth’s profile on SEDAR at www.sedar.com.