The combined company will operate as Gold Flora Corporation and is anticipated to remain a reporting issuer in Canada on the Neo Exchange Inc. and on the OTC Markets Group Inc.
Under the all-stock merger agreement, The Parent Company shareholders will own approximately 49% and Gold Flora holders will own approximately 51% of the outstanding common equity of the combined company.
The combined company would have pro forma revenue of $116.4 million for the nine-month period that ended Sept. 30, 2022, with a gross margin of 33%.
Once the merger is complete, The Parent Company CEO Troy Datcher will be named chairman of the board and Gold Flora CEO Laurie Holcomb will be named CEO of the combined company. The board of directors will be composed of three nominees of The Parent Company, including Datcher as chair, and four nominees of Gold Flora, including Holcomb.
"This merger of equals with the Gold Flora Corporation represents the next stage in our evolution, leveraging our complementary assets and core capabilities to deliver the most value for our customers and shareholders," Datcher said. "Together, we will have the strategic platform comprised of scale, cultivation capabilities and brand portfolio to execute on our mission to create unique and culturally relevant products. This vertical integration will fuel both the development of more consumer brands and broader consumer reach while enabling us to improve our gross margin and profitability to establish our business as a true leader in California to take advantage of the incredible growth opportunities ahead of us."
The combined company is expected to operate 20 retail stores, 12 house brands, three distribution centers, one manufacturing facility and six cultivation facilities. It will have an indoor cultivation canopy of approximately 72,000 sq. ft., with the opportunity to expand to a further approximately 240,000 sq. ft..
Through the streamlining of retail operations, utilizing scale to access bulk purchasing power, and eliminating third-party contracts, the combined company is expected to achieve annualized cost savings of between $20 and $25 million.
As California operators, the companies expect the merger will result in a diversified and complementary product offering, with a variety of form factors and brands for differentiated consumer profiles. Additionally, with only 13% overlap in current company retail store footprints, there is opportunity for cross-selling brands into diverse customer bases to drive organic growth.
"We are thrilled to embark on this groundbreaking effort to create a true vertical leader in the most exciting cannabis market in the world," Holcomb said. "By combining our proven approach to lean, effective infrastructure and vertically integrated operations from cultivation through distribution, and The Parent Company's brand building expertise and retail and delivery footprint, we expect to achieve market defining performance at every level of the business. Our team has done a phenomenal job of optimizing our indoor cultivation capabilities, building our portfolio of proprietary genetics and advancing our high-quality manufacturing and distribution operations, and we look forward to leveraging these strengths as we begin our work to combine our two companies.”
The merger is expected to close before the end of the third quarter of 2023, following the satisfaction or waiver of closing conditions including, among others, approval by two-thirds of the votes cast by the shareholders of The Parent Company, the approval of the Supreme Court of British Columbia and the approval of the NEO Exchange.