Multi-State Operator Stem Holdings to Acquire California Cannabis Delivery Company for C$41 Million in Stock

Stem Holdings, Inc. Announces Signing of Definitive Agreement to Acquire Driven Deliveries, Inc.
  • Stem Holdings will become Driven By Stem
  • Combination Creates a New Paradigm of Brands and Supply Chain for the U.S. Cannabis Industry
  • Adam Berk, CEO of Stem Holdings and former CEO of Osmio (currently Grubhub) to Continue as CEO of Driven by Stem

BOCA RATON, Fla. and LOS ANGELES, Oct. 6, 2020 /PRNewswire/ —

  • The acquisition (the “Acquisition”) by Stem Holdings, Inc. (“Stem”) of all of the stock of Driven Deliveries, Inc. (“Driven Deliveries”) will create what Stem believes will be the first vertically-integrated cannabis company with an integrated Delivery as a Service (DaaS) platform to meet the growing market for medical and adult-use cannabis home delivery with best-selling and disruptive new products.
  • The Acquisition is expected to close in late calendar year 2020 as an all-stock transaction. Driven Deliveries shareholders will receive one share of common stock of Stem (each, a “Stem Share”) for each share of common stock of Driven Deliveries (each, a “Driven Share”) held for an aggregate purchase price of approximately C$41.3M. The closing market price of the Stem Shares was C$0.55 on the Canadian Securities Exchange and US$0.36 on the OTCQB on October 5, 2020.
  • The resulting company (“Driven By Stem” or the “Combined Company”) is expected to have a combined market capitalization of approximately USD$54 million, based on the closing market price of the Stem Shares and the Driven Shares on the OTCQX and the OTCQB, respectively, on October 5, 2020 and 65M Stem Shares and 75M Driven Shares being outstanding on October 5, 2020.
  • Current shareholders of Driven Deliveries have committed up to USD$10 million to fund the Combined Company’s continued business expansion within Stem’s current market footprint including California, Oklahoma and Oregon.
  • As part of the Acquisition, Stem will change its name to “Driven By Stem” and the Combined Company will continued to be headquartered in Boca Raton, Florida.
  • Stem and Driven Deliveries achieved combined gross revenue of USD$12.4 million in CY20/Q2 and a combined gross profit of USD$4.94 million. Total CY20 gross revenue of Stem and Driven Deliveries, as a combined entity, is projected to be USD$49 million with gross profit of USD$18 million.
  • Driven By Stem is projected to have revenues of USD$75 million in CY21 and gross profit of USD$27 million. The Acquisition is expected to be immediately accretive to earnings of Stem.
  • Stem and Driven Deliveries will hold a conference call, including a webcast with slides, at 8:30 am EDT on October 6, 2020 during which senior management will discuss the Acquisition.

Stem Holdings, Inc. (OTCQX: STMH CSE: STEM), a leading vertically-integrated cannabis and hemp branded products company with state-of-the-art cultivation, processing, extraction, retail, and distribution operations throughout the United States, and Driven Deliveries, Inc. (OTCQB: DRVD), an e-commerce and DaaS (delivery-as-a-service) provider with proprietary logistics and omnichannel UX/CX technology, today announced that they have entered into a definitive agreement and plan of reorganization dated October 5, 2020 (the “Definitive Agreement”) pursuant to which Stem has agreed to acquire all of the stock of Driven Deliveries. Following completion of the Acquisition, Stem believes Driven By Stem will be the first vertically-integrated cannabis company with a DaaS platform, which will meet the needs of all cannabis consumers in markets served.

Under the terms of the Definitive Agreement, Driven Deliveries shareholders will receive one Stem Share for each Driven Share held for an aggregate purchase price of approximately C$41.3M.  Driven By Stem is expected to have a combined market capitalization of approximately USD$54 million, based on to closing market price of the Stem Shares and Driven Shares on the OTCQX and the OTCQB, respectively, on October 5, 2020 and 65M Stem Shares and 75M Driven Shares being outstanding on October 5, 2020.

The Board of Directors of each of Stem and Driven Deliveries have unanimously approved the Acquisition and it is expected to close in late 2020, subject to regulatory and stockholder approvals, completion of final due diligence and other customary closing conditions. Driven By Stem, the combined entity after giving effect to the Acquisition, will maintain its headquarters at Stem’s current location in Boca Raton, FL. Following the completion of the Acquisition, synergies in sales, operations, and SG&A are expected, leading to organic growth and margin expansion. The Acquisition is expected to be immediately accretive to earnings of Stem. The Acquisition is an arm’s length transaction.

The shares of common stock of the Combined Company are expected to continue to trade under Stem’s current symbols (OTCQX: STMH CSE: STEM).

New Paradigm for Cannabis

Driven By Stem will integrate Driven Deliveries’ delivery capability and its robust technology in every state in which Stem currently operates, and add Stem’s iconic cannabis brands to Driven Deliveries’ platform of over 400 cannabis products.  Stem’s brand offerings cover multiple cannabis product categories, particularly flower, extracts, edibles, and topicals with award-winning brands including  TJ’s Gardens™ and Yerba Buena™; Cannavore™ an edible brand; and Doseology™, a CBD mass market brand launching in 2021.  As a cannabis technology company, Driven Deliveries’ Budee™ and Ganjarunner™ e-commerce platforms will also partner with leading cannabis companies in new geographies to meet demand for quick and accurate product deliveries.  Initial operations will span nine states.

Management and Corporate Governance

Upon the closing of the Acquisition, the members of senior management of the Combined Company are expected to be:

  • Adam Berk, Chief Executive Officer and Chairman: Adam Berk is the current CEO of Stem and a member of Driven Deliveries’ Board of Directors. Adam Berk is the former CEO of Osmio (currently GrubHub), which was the first patented web-online food ordering system.
  • Steve Hubbard, Chief Financial Officer: Steve Hubbard is the current CFO of Stem.
  • Ellen Deutsch, EVP/Chief Operating Officer: Ellen Deutsch is the current Executive Vice President and COO of Stem. Ellen Deutsch was an executive of Hain Celestial for over 20 years prior to joining Stem.
  • Sal Villanueva, President:  Sal Villanueva is the current President of Driven Deliveries.
  • Brian Hayek, Chief Compliance Officer & Special Projects: Brian Hayek is a co-founder and current Chief Financial Officer of Driven Deliveries.

Christian Schenk, current Chairman and CEO of Driven Deliveries, has tendered his resignation effective October 4, 2020 to pursue other interests. Brian Hayek stated, “Merging with Stem completes our transition from an online cannabis technology company and delivery service to a vertically-integrated cannabis operator, and fast-tracks our expansion strategy into new states.”  He concluded, “This is a defining moment in our history and is expected to expand our total addressable market and growth opportunities.”

Synergies

The Acquisition is expected to be EPS accretive in CY21. Other expected benefits are:  (1) increased scale to drive sales growth, (2) leveraging Driven Deliveries’ proprietary technology in new markets to drive market share; (3) cost savings estimated at $1.5MM in the first year through productivity initiatives, vertical supply chain efficiencies, and reduction and consolidation of overhead and administrative costs.  The Acquisition is not expected to increase debt levels.

No other cannabis company has the breadth of top-shelf brands and convenience sought by cannabis consumers which Driven By Stem will offer. We will apply Driven Deliveries’ technology, footprint, and distribution capability to all markets, and leverage our own licenses and retail dispensaries to service more consumers in every state in which we operate.

Adam Berk, CEO of Stem

We are excited about the unique opportunities that this combination creates as we build a better model to adapt to the changes in the cannabis marketplace and deliver shareholder value year over year.

Original Press Release

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Published by NCV Newswire
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