Dixie Brands, one of Denver's early marijuana-infused product brands, has agreed to an acquisition deal with a private equity firm that specializes in cannabis mergers.
According to a joint announcement from Dixie and BR Brands, a branch of Connecticut-based marijuana investment firm Rose Capital, the transaction is valued at over $43.2 million and is expected to be finished by the third quarter of 2020.
Dixie Brands was founded in 2010 as a medical marijuana company, then known as Dixie Elixirs, and was one of the first commercial manufacturers of THC-infused drinks in Colorado. Over the past ten years, the company branched out, making edibles, topicals, capsules and other infused products. Dixie was able to attain a spot in the Canadian stock exchange before partnering with AriZona Iced Tea for a licensing deal in 2019.
Rose Capital reportedly started investing in Dixie in 2018, just after then-Dixie CEO and co-founder Tripp Keber walked away from the company...for a role with BR Brands, where he was brought on to "identify potential companies for acquisition," according to a 2018 Marijuana Business Daily article.
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Per the terms of the most recent deal, BR Brands will perform a reverse takeover of Dixie, converting approximately $6 million of senior secured indebtedness into company shares and infusing an additional $1 million into the company for various distribution and licensing needs, resulting in BR Brands owning approximately 80 percent of company shares. Dixie will stop issuing public shares on the Canadian stock exchange until the merger is finalized, according to the two parties.
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After the merger, the new Dixie board of directors will comprise three nominees from BR Brands and two from Dixie, the announcement reads. Dixie's current president and CEO, Chuck Smith, will retain his respective positions; the announcement also shared that Dixie CFO Greg Robbins has resigned effective immediately, but his resignation was unrelated to the deal, according to Dixie.
Smith calls the merger a "strategic combination" for manufacturing and distribution in a statement announcing the agreement. "The challenges of the current cannabis related capital markets have guided Dixie to look for a strategic partner in order to solidify a platform we can leverage for long-term stable growth for our shareholders," he says. "We are very pleased with the fundamentals of the deal, as they will strengthen our balance sheet by decreasing debt, improving our cash position, and providing opportunities to enhance revenue growth and capture greater margin."
BR Brands is funded by Rose Capital, which owns majority control of four other cannabis businesses in California and Colorado, including Mary's Nutritionals, the Denver-based parent company of Mary's Medicinals, and California's Rebel Coast winery, the country's first commercial cannabis wine maker.