Wrigley Heir latest to tap SPAC frenzy to take U.S. pot firm public
A U.S. cannabis company led by the heir to the Wrigley's chewing gum fortune struck a deal Monday to go public through a special purpose acquisition company (SPAC) in a move that values the pot firm at US$1.88 billion.
Beau Wrigley, who led Wrigley Jr. Co. until its sale to candy maker Mars Inc. in 2008, will merge cannabis operator SH Parent Inc., with Ceres Acquisition Corp. to list on the NEO Exchange. That deal is expected to close later this summer. Separately, the combined company raised US$225 million that it intends to use for potential acquisitions.
SH Parent, which is better known by the trade name Parallel, is the latest U.S. cannabis operator to tap public markets amid a flurry of interest in the space as American legislators signal they intend to pass several marijuana reform bills that could result in the drug being legalized south of the border as early as this year.
Wrigley said on Monday that he's been studying the wellness benefits tied to cannabis. He said promoting the drug as a health product could help Parallel draw consumers away from the illicit market.
"I've done a lot of diligence on this whole category, and I am 100 per cent convinced that cannabis can address so many quality of life issues," Wrigley said in an interview.
"It's disrupting beverages, alcohol, and even opioids. If you can bring those qualities to health and wellness, then the focus is a perfect match."
Ceres is led by Joe Crouthers, a former portfolio manager at Goldman Sachs Group Inc., and Scott "Scooter" Braun, a high-profile music industry manager whose clients include Stratford, Ont.-native Justin Bieber.
Once the deal closes, Parallel will have US$430 million of cash on hand and said it expects to generate net revenue of US$447 million this year. The company operates in five U.S. states - Florida, Pennsylvania, Massachusetts, Texas, and Nevada - and owns 42 cannabis dispensaries.
Crouthers said in an interview that he doesn't expect to see Braun's music-industry connections result in any artist-branded cannabis products, but added that it provides a way to market the company's offerings to a captive audience that falls within that target demographic.
"I wouldn't think of it as a brand of Carly Rae Jepsen [cannabis] gummies, but I would think [of having a presence] at her concerts. There are ways that you can promote the brand to get in front of people that don't normally interact with cannabis," Crouthers said.
Parallel joins several other cannabis companies that have gone public through the SPAC route including The Parent Company, a Jay-Z-led marijuana operator that struck a deal with Subversive Capital Acquisition Corp. that valued the company north of US$1 billion last month.
That interest has led to a surge in financings for U.S. cannabis players that have raised a record US$1.87 billion in the first six months of this year, 41 per cent more than the prior high set in 2018, according to Viridian Capital Advisors.
"It is undoubtedly an exciting time to do a SPAC," Viridian said in a recent report. "On the one hand, cannabis stocks are red hot, so it would appear quite challenging to find bargain-priced acquisitions and earn outsized returns. On the other hand, there is an extreme size-based arbitrage evidenced in the market today."
Both Wrigley and Crouthers said the SPAC deal allows Parallel to tap public markets more efficiently rather than through traditional means. It also provides an easier way to attract institutional investment, as large investors face challenges entering the cannabis sector due to the U.S. federal illegality of the drug, Crouthers added.