TORONTO, Can. – In what appears to be one of the first big cannabis consolidations in Michigan, Canadian-based TerrAscend plans to enter Michigan’s rapidly growing cannabis market through the acquisition of Detroit-based Gage Growth in an all-stock deal reportedly worth $545 million.

TerrAscend, which has operations in both the U.S. and Canada, said the deal will give it a leading position in Michigan, which the company considers the third-largest American cannabis market.

TerrAscend, in a press release, said Gage shareholders will receive 0.3001 of a common share of TerrAscend for each Gage Share held based on the closing price of TerrAscend on August 31.  Gage had $32.8 million in cash “with minimal debt” as of June 30.

Upon completion of the Transaction, the combined business will have operations in five states and Canada, including seven cultivation and processing facilities and 23 operating dispensaries serving both medical and adult-use cannabis markets in the U.S. and Canada, including 10 now operated in Michigan by Gage with 10 more in the planning stages. 

“The acquisition of Gage expands our footprint to the third largest cannabis market in the U.S.,” said Jason Wild, Executive Chairman of TerrAscend. “Combining our market-leading share in our existing states with Gage’s proven cultivation, retail, and marketing capabilities, creates one of the largest and most dynamic companies in the industry. We look forward to leveraging Gage’s profound connection with Michigan’s consumers, in addition to its established partnerships with award-winning brands like COOKIES, to provide our patients and customers with best-in-class product offerings and retail experiences.”

According to the release, the combined business will:

  • Operate in five states – California, Maryland, Michigan, New Jersey and Pennsylvania – and Canada.

  • Own seven cultivation and processing facilities, including three Gage facilities in Michigan.

  • Own 23 operating dispensaries in medical and adult-use markets, including Gage’s 10 operating dispensaries in Michigan.

Gage plans to open 10 more Michigan dispensaries “in the coming months,” according to the release.

“Our shared strategic and corporate values make this combination a strong fit,” said Fabian Monaco, CEO of Gage. “We also recognize the incredible success that TerrAscend has enjoyed in recent years. We could think of no better company to partner with as we execute on our shared strategy of deep vertical integration and scale in our core markets, with a vision of creating the most consumer-centric cannabis company in the world.”

Key Transaction Highlights and Benefits

If consummated, the Transaction is anticipated to result in the following benefits:

  • Leadership in a Top 3 Market: Gage has established itself as a leader in the Michigan market, which is the third largest cannabis market in the U.S.2 with reported cannabis sales of $171 million in the month of July 2021, representing an annualized market size of approximately $2.1 billion2.
  • Premium Brands: The Transaction will provide access to Gage’s sought-after brand and proprietary library of genetics as well as Gage’s exclusive licensing partnerships in Michigan with COOKIES, SLANG Worldwide, Blue River, Pure Beauty, and Khalifa Kush.
  • Efficient Operating Model: The combined company will operate 7 cultivation facilities, including 3 cultivation facilities in Michigan, in addition to Gage’s 9 contract grow agreements.
  • Expanding Retail Footprint: The combined company will operate a retail network expected to reach 34 stores over the coming months. This includes 23 currently open dispensaries across 5 states with Gage operating 10 dispensaries in Michigan in addition to TerrAscend’s 13 store footprint in key markets including CaliforniaNew Jersey and Pennsylvania. TerrAscend is expected to open its 14th dispensary in the fourth quarter in Lodi, New Jersey and Gage is expected to open 10 additional dispensaries across Michigan in the coming months.
  • A Leader in Experiential Retail: Gage’s award-winning retail stores generate industry leading retail metrics, including strong average basket size ($152 in the second quarter of 2021 compared to Michigan average of $853) and premium pricing for its flower products (40%+ relative to the Michigan market average price2). TerrAscend expects to leverage Gage’s portfolio of over 40+ proprietary flower strains in addition to brand and marketing capabilities, at retail locations in other states.
  • Expert Operating Teams: The Transaction combines management teams with similar core philosophies, strong track records of execution and operational expertise in building leading businesses in the most competitive cannabis markets in the country.