Greenlane Holdings, Inc. (NASDAQ: GNLN) has inked a merger agreement with KushCo Holdings Inc. After the execution of the merger agreement, KushCo will become the fully-owned subsidiary of Greenlane. This merger deal will allow Greenlane to engage in strategic priority areas before the execution of the deal. The firm will pursue certain anticipated purchases and capital-raising deals.
Strategic Basis of Transaction
The strategic rationale and financial benefits behind this merger are that after the execution of an agreement firm will establish an ancillary cannabis company. The merged firm will serve a leading group of customers. Furthermore, the deal is anticipated to create nearly $15 million to 20 million of yearly run-rate cost synergies within 24 months from the execution of the deal.
Additionally, this deal will bring together the two experienced industry leaders. Both the firms have set up successful track records of promoting innovative products and cooperate with groundbreaking brands in all phases of the product lifecycle. As per the deal, the shareholders of KuchCo will get nearly 0.2546 shares of Greenlane Class A common stock for each share of KushCo common stock.
Financial Benefits
The merged firm is projected to have pro forma revenue of over $250 million for the year finalized on December 31, 2020. Moreover, it will generate a pro forma market capitalization greater than $350 million based on the corresponding share prices of Greenlane and KushCo as of the market close on March 30, 2021.
The existing shareholders of GNLN will sustain their current shares of Greenlane common stock. However, the shares of Greenlane Class C common stock will be changed into shares of Greenlane Class B common stock on a 3-to-1 basis as per the deal. The deal is planned to be without the tax for KushCo, Greenlane, and their particular shareholders for US federal income tax purposes. The shareholders of both firms have unanimously permitted this transaction.