Cresco Labs co-founder and former president Joe Caltabiano is launching a $100 million SPAC (special purpose acquisition corporation) aimed at purchasing cannabis companies in the U.S., Canada or international markets.
The so-called blank check company, Choice Consolidation Corp., today filed a 137-page preliminary prospectus outlining its plans to buy into the marijuana sector.
Caltabiano previously teased his plans to look for potential acquisition targets during an interview with THCnet last November.
The newly formed SPAC intends to list its class A shares on Canada’s Neo Exchange and has $32.5 million in committed capital from lead investors, according to the filing.
Caltabiano, who left Cresco last March, will serve as CEO of Choice Consolidation. Other key members of the management team include former Green Thumb Industries CEO Peter Kadens, and former Cresco CFO Ken Amann.
Lois Mannon, a CPA who runs a private accounting and financial advisory services firm, will serve as CFO.
Lisa Gavales, a retail executive with three decades of experience at popular chains like Bloomingdale’s, Talbots and Express, among others, has also been appointed as an independent board director.
Investors in the SPAC include Caltabiano and Senvest Management, a New York City-based firm with $2 billion in assets under management. Senvest already has $160 million invested in the U.S. cannabis space and is an anchor investor in Weedmaps.
Caltabiano and Senvest are sponsoring the SPAC via separate investment vehicles. Together, they intend to purchase $5 million worth of sponsor warrants, priced at $1 each, according to the preliminary prospectus.
Choice Consolidation has already identified “prospective targets for a qualifying transaction,” but it has yet to initiate “substantive discussions” with those businesses.
“We believe we have the opportunity to create a compelling structure that will enable a target company to go public, thereby accessing significant capital for both organic growth and for acquisitions of synergistic and often undercapitalized assets,” the prospectus states.
Choice Consolidation’s investment thesis is built around what it describes as a “second mover advantage” that leverages its founders’ connections and knowledge of the cannabis sector to acquire and improve existing businesses.
According to the filing, potential targets would include single state operators in markets with “significant barriers to entry” and “high operating margins.”
The company also plans to look for distressed assets that “require minimal to moderate incremental capital” to revive while pursuing “paper licenses” that have been obtained but are not being utilized.
“We believe based on our management’s business knowledge and past experience that there are numerous qualifying transaction targets,” the filing states. “We expect that our principal means of identifying potential target businesses will be through the extensive contacts and relationships of our Sponsors, officers and directors.”
Caltabiano recently penned an article for Green Entrepreneur entitled "What Makes a Good Cannabis SPAC?" In it, he explained what makes a succesful cannabis SPAC.
Recently formed SPACs have poured hundreds of millions of dollars into the cannabis space in recent months.
The Parent Company — formerly known as Subversive Capital Acquisition Corp. — last week completed its acquisition of California’s Caliva and Left Coast Ventures and began trading on the Neo Exchange with a market capitalization of more than $1 billion.
Cannabis e-commerce platform Weedmaps also recently announced plans to merge with Silver Spike Acquisition Corp. in deal valued at $1.5 billion.
Bespoke Capital Acquisition Corp., which intended to focus on the cannabis sector, last month said it would expand its search to include targets in the alcoholic beverage and CPG sectors.
Several SPACs are targeting the cannabis industry, including Greenrose Acquisition Corp. and Merida Merger Corp. I, among many others.
Additional information is available in the news release below.
Choice Consolidation Corp. Files Preliminary Prospectus for U.S.$100,000,000 Initial Public Offering
SPAC to be led by a management team with significant cannabis industry M&A and operational experience
TORONTO, Jan. 22, 2021 /CNW/ - Choice Consolidation Corp. (the "Corporation") has filed a preliminary prospectus for an initial public offering (the "Offering") as a newly-organized special purpose acquisition corporation formed for the purpose of effecting an acquisition of one or more businesses or assets within a specified period of time.
The Corporation intends to focus its search for target businesses on cannabis cultivation, production distribution, brands, manufacturing and/or retailing businesses or related businesses; however, it is not limited to a particular industry or geographic region for purposes of completing its qualifying transaction. The Corporation intends to target existing strong single-state operators in markets with high barriers to entry, distressed assets that require minimal to moderate incremental capital to 'turn on' and paper licenses in targeted states that can be obtained on accretive terms.
The Corporation's management team and board of directors combines retail and cannabis industry expertise and includes:
Joe Caltabiano – Chief Executive Officer and Director Co-founder and former President, Cresco Labs Inc.; Lois A. Mannon – Chief Financial Officer Founder and Chief Executive Officer, Mannon Consulting LLC; Peter Kadens – Director Former Chief Executive Officer, Green Thumb Industries Inc. and independent board director; Ken Amann – Director Advisor and former Chief Financial Officer, Cresco Labs Inc. and independent board director; and Lisa Gavales – Director Independent board director.
The preliminary prospectus has been filed with the securities regulatory authorities in each of the provinces and territories of Canada other than Québec. The Offering is for class A restricted voting units of the Corporation (the "Class A Restricted Voting Units") at an offering price of U.S.$10.00 per Class A Restricted Voting Unit, the aggregate proceeds of which will be placed in escrow pending completion of a qualifying transaction by the Corporation and will only be released upon certain prescribed conditions.
Each Class A Restricted Voting Unit is comprised of a class A restricted voting share of the Corporation (a "Class A Restricted Voting Share") and one-quarter of a share purchase warrant of the Corporation (a "Warrant"). Each whole Warrant will entitle the holder to purchase one Class A Restricted Voting Share for a purchase price of U.S.$11.50, commencing 65 days after the completion of the qualifying transaction and will expire on the day that is five years after the closing date of the qualifying transaction or earlier.
The Offering is being distributed by Canaccord Genuity Corp. and Beacon Securities Limited (together, the "Underwriters"). The Corporation has granted the Underwriters a non-transferable over-allotment option (the "Over-Allotment Option") to purchase up to an additional 1,500,000 Class A Restricted Voting Units on the same terms and conditions, exercisable in whole or in part, by the Underwriters up to 30 days following closing of the Offering. If the Over-Allotment Option is exercised in full, the gross proceeds of the Offering would be U.S.$115,000,000.
Prior to the qualifying transaction, the Class A Restricted Voting Units will trade as a unit and may only be redeemed as a unit upon the occurrence of certain events. Class A Restricted Voting Units will be redeemable for a pro-rata portion of the amount then held in the escrow account, net of taxes payable and other prescribed amounts. Each Class A Restricted Voting Unit will separate following the closing of the qualifying transaction into one common share of the Corporation and one-quarter of a Warrant.
The Corporation has filed an application to list the Class A Restricted Voting Units on the Neo Exchange (the "Exchange"). Listing will be subject to the Corporation fulfilling all the listing requirements of the Exchange.
The sponsors of the Corporation are Choice Consolidation SM Sponsor LLC and Calti Choice Sponsor LLC (together, the "Sponsors"). Senvest Management, LLC has an interest in Choice Consolidation SM Sponsor LLC and Calti Choice Sponsor LLC is controlled by Joe Caltabiano.
Certain entities under common control with a Sponsor (including entities that are, or are advised by, their affiliates) have committed $32.5 million of non-redeemable capital through the purchase of an aggregate of 3,250,000 Class A Restricted Voting Units under the Offering. In addition, the Sponsors intend to purchase 5,000,000 share purchase warrants ("Sponsors' Warrants") at an offering price of U.S.$1.00 per Sponsors' Warrant for aggregate proceeds equal to U.S.$5,000,000, concurrently with the closing of the Offering.
Blake, Cassels & Graydon LLP is acting as legal counsel to the Corporation and the Sponsors. Goodmans LLP is acting as legal counsel to the Underwriters.
A preliminary prospectus containing important information relating to these securities has been filed with securities commissions or similar authorities in each of the provinces and territories of Canada other than Quebec. The preliminary prospectus is still subject to completion or amendment. Copies of the preliminary prospectus may be obtained from the underwriters listed above. There will not be any sale or any acceptance of an offer to buy the securities until a receipt for the final prospectus has been issued.
Completion of the Offering is subject to the receipt of customary approvals, including regulatory approvals.
About Choice Consolidation Corp.
Choice Consolidation Corp. is a newly organized special purpose acquisition corporation incorporated under the laws of the Province of British Columbia for the purpose of effecting, directly or indirectly, a qualifying transaction within a specified period of time.
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