Stem Holdings Inc. (OTCMKTS:STMH) and Driven Deliveries Inc. (OTCMKTS:DRVD) have announced the signing of a definitive agreement and plan of reorganization. According to the agreement, Stem will acquire all shares of Driven Deliveries Inc.
Stem and Driven Deliveries to create a vertically integrated company
The acquisition will create a vertically integrated pot company that has integrated Delivery as a Services platform. This will help meet the growing market for adult-use home delivery and medical cannabis with disruptive and bestselling products. The company anticipates the acquisition to be finalized towards the end of this year in an all-stock transaction.
According to the definitive agreement, shareholders of Driven Deliveries will receive one Stem Holding share for every Driven Delivery share held for a total purchase price of CA$41.3 million. On October 5 when the companies entered the agreement, the closing price for Stem stock was CA$0.55 on CSE and $0.36 on OTCQB. The combined company, Driven By Stem, will have a market cap of $54 million based on the closing price of Stem Shares on October 5, 2020.
Stem and Driven Deliveries Board of Directors have approved the acquisition unanimously, but the deal is subject to stockholder and regulatory approval. The combined company will keep its headquarters at Boca Raton, Florida, which is the current location for Stem.
With the completion of the acquisition, the new company expects synergies in operations, Sales, and SG&A, which will lead to organic growth as well as the expansion of margins. Current Stem CEO and Driven Deliveries Board of Directors member will be the CEO and Chairman Adam Berk of Driven By Stem.
Combination expected to be earnings accretive
In the second quarter of this year, the companies had combined revenue of $12.4 million and a gross profit of $4.94 million. The business combination move will be accretive to earnings, and for the calendar year 2020, the companies expect to have combined revenue of $49 million and gross profit of around $18 million.
In CY2021, the Driven By Stem entity will generate a $75 million revenue and gross profit of $27 million.