The combined company will have 63 retail locations across Ontario, Alberta, Manitoba and Saskatchewan, Calgary-based High Tide and Toronto-based Meta Growth said in a news release on Friday.
The companies said the combined entity will rank number one in Ontario, based on corporate-owned store count. They plan to expand to 115 locations by the end of 2021, with a focus building stores in Ontario.
Under the terms of the all-stock deal, Meta Growth shareholders will receive 0.824 of a High Tide share for each unit owned, implying a price of $0.13. Following the deal, Meta shareholders will own an estimated 45.6 per cent of the combined company.
"The combination with Meta is a watershed moment in High Tide's evolution as we become Canada's largest and strongest cannabis retailer,” High Tide CEO Raj Grover said in a statement. Grover and his team will lead the combined company.
The two companies estimate $133 million in annualized sales, and claim to have identified between $8 million and $9 million cost savings. They expect to report positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
The deal takes aim at Fire & Flower (FAF.TO), which had a network of 46 cannabis retail stores in operation as of June 15. Fire & Flower recently unveiled a pilot project to open pot stores next to Circle K locations in Alberta to lure more customers. Circle K’s owner, convenience store giant Alimentation Couche-Tard (ATD-B.TO), owns a 15 per cent stake in Fire & Flower.
More than 1,000 cannabis retail stores have opened across Canada since the legalization of recreational pot in October 2018. On Friday, Statistics Canada reported recreational cannabis sales hit a record $201 million in June, led by strong sales in Ontario.
The slower-than-anticipated pace of store openings in Canada’s most populous province has been a consistent source of frustration for the cannabis industry as it fights to gain share from a persistently strong illegal market.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.