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Flora Growth Corp., a Colombian marijuana grower, has agreed to buy U.S. vape-device maker Vessel Brand Inc. for up to US$33 million, a deal that will boost Flora’s international and U.S. presence.
Flora’s acquisition of the Carlsbad, California-based company will give it access to the growing market for cannabis vaping products, Flora Chief Executive Officer Luis Merchan said in a phone interview. The agreement follows a presidential decree in Colombia that allows Flora to begin exporting its marijuana. The deal has been agreed to in principle but the parties are still negotiating specific terms.
While U.S. law still prevents Flora from sending cannabis products there, or engaging in any business that directly touches the marijuana plant, the device maker still offers a foothold in the world’s biggest cannabis market, Merchan said. Flora plans to use Vessel’s marketing and e-commerce operations to boost its hemp and CBD products, which include a skincare line and a clothing brand. Outside the U.S., Flora can sell marijuana that customers can use with the devices.
Demand for vaping products is accelerating. A May report from Grandview Research estimated that the global e-cigarette and vape market size was US$15 billion in 2020 and is expected to expand at a rate of 28 per cent from 2021 to 2028.
Vessel’s vape devices, which are sold in the U.S. and internationally, feature sleek design and high-end flourishes like full-grain leather and real walnut wood, with many of its vape pens selling for US$79.
The privately held company’s 2020 revenue was US$4.5 million, while gross margin was 52 per cent. It had trailing 12-month revenue of US$6.2 million, according to Flora.
Merchan compared the company to “Apple in the phone category” and said Flora was most attracted to the company’s talent. Vessel founder and CEO James Choe will continue to operate the business.
Flora is focusing on premium products, such as its line of beauty products including lotions and cleansers, and its Stardog Loungewear clothing line.
The deal was negotiated without investment advisers, and will be financed with US$7 million in proceeds from Flora’s May initial public offering, along with the issuance of US$23 million in shares when the agreement is finalized, Merchan said.
Flora and Vessel have discussed a purchase price of about US$30 million. While the terms haven’t been finalized, the deal could also include several million dollars of bonus compensation if it achieves certain milestones.