Cannabis investment firm RIV Capital Inc. (TSX: RIV) (OTC: CNPOF) has signed a deal with The Hawthorne Collective, a newly-formed cannabis-focused subsidiary of The Scotts Miracle-Gro Company (NYSE: SMG) for the purchase of a $150 million unsecured convertible note from RIV Capital. the investment is expected to close near August 24.
The Investment establishes RIV Capital as The Hawthorne Collective’s preferred vehicle for investments not currently under the purview of The Hawthorne Gardening Company. RIV Capital said its strategy remains the same as its previously disclosed plans to acquire, invest in, launch, and/or develop U.S. assets to build multistate cannabis operating and brand platform.
“As we approach the launch of our U.S. platform, we are excited to announce the strategic investment from The Hawthorne Collective, a subsidiary of one of the largest and most successful companies serving both the CPG and cannabis sectors,” said Narbé Alexandrian, President and CEO, RIV Capital. “The Investment opens opportunities for considerable value creation and growth for RIV Capital, including potential access to additional capital that will accelerate our platform’s growth. With ScottsMiracle-Gro’s strong track record, reputation, and brand awareness, we can build upon lessons learned in both the Canadian and U.S. cannabis markets, and leverage their insights to optimize our acquisition and investment strategy.”
Canopy Rivers History
Six months ago, RIV Capital’s wholly-owned subsidiary, RIV Capital Corporation (formerly Canopy Rivers Corporation) transferred its interests in TerrAscend Corp., TerrAscend Canada Inc., Les Serres Vert Cannabis Inc., and The Tweed Tree Lot Inc. to Canopy Growth in exchange for approximately $115 million in cash, 3,647,902 common shares of Canopy Growth (having a value of approximately $170.3 million as at the close of trading on the Toronto Stock Exchange on February 22, 2021), and the cancellation of all 36,468,318 Multiple Voting Shares and 15,223,938 Subordinate Voting Shares of RIV Capital held by Canopy Growth. The plan was a strategy to pave the way for investments into U.S. cannabis companies.
At the time, Alexandrian said, “With a revitalized balance sheet and our new strategy in place, we have been actively sourcing opportunities in the world’s largest and most exciting cannabis market, and continue to believe that this next chapter will create significant value for our shareholders in the quarters to come.”
On closing of the Investment, RIV Capital will also expand its Board of Directors to seven seats and add three ScottsMiracle-Gro nominees alongside the existing RIV Capital directors. The new board members include Chris Hagedorn, Executive Vice President, ScottsMiracle-Gro, and Division President, The Hawthorne Gardening Company. Mark Sims, Senior Vice President, Strategy and M&A, ScottsMiracle-Gro. Gary Vaynerchuk, Chairman of VaynerX, and CEO, VaynerMedia. Mr. Vaynerchuk is an established and successful entrepreneur. In his current roles, he assists Fortune 1000 brands to leverage emerging platforms to attain and retain consumer attention.
“The addition of The Hawthorne Collective into our portfolio allows us to explore and pursue new opportunities in an industry that is poised for significant growth in the years ahead,” said Jim Hagedorn, Chairman and CEO, ScottsMiracle-Gro. “We are confident in our partners at RIV Capital and that our long-term approach ultimately will drive meaningful value for our shareholders.”
With over six years of experience as a key ancillary provider in the U.S. cannabis industry via its subsidiary, The Hawthorne Gardening Company, North America’s leader in indoor and hydroponic growing supplies, ScottsMiracle-Gro has significant knowledge and expertise in the U.S. cannabis sector. Since its inception, The Hawthorne Gardening Company has grown into one of the largest cannabis-focused companies in the world on a revenue basis, and has cultivated relationships with operators, brands, and ancillary providers. Now, through the Investment, the newly-formed The Hawthorne Collective is injecting significant capital into the company, to be used for general corporate and lawful purposes, that will unlock potential access to capital which will accelerate the launch and expansion of its U.S. cannabis operating and brand platform.
“While the Investment adds further capital to our balance sheet, our strategy remains the same,” added Alexandrian. “We have an extensive deal pipeline with some near-term prospects, and we will continue to focus our efforts on those prospects that we believe will contribute to building a leading multistate operator and brand platform in the U.S. market.”
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