Canadian Giant SNDL Speeds Up Acquisition Of Majority Positions In Two US Cannabis Companies As Marijuana Rescheduling Looms

Zinger Key Points
  • SNDL's SunStream USA group of companies will proceed with the process of acquisition of equity positions in U.S. cannabis assets.
  • SunStream USA is anticipated to be a majority owner in U.S. cannabis companies having assets in five U.S. states.
  • The initiative will allow SNDL to deploy additional investment capital into the SunStream USA upon federal legalization.

SNDL Inc. SNDL, through its joint venture with SunStream Bancorp Inc., announced on Thursday that SunStream USA group of companies will proceed with the process of acquiring equity positions in U.S. cannabis assets, following the completion of a review by SNDL’s listing authority, NASDAQ. 

SunStream USA I, LLC and SunStream USA II, LLC are among the entities that comprise the SunStream USA Group, with each entity including one or more third-party investors, all independently managed and governed.

What Happened

The Calgary, Alberta-based company said on Thursday that SNDL’s affiliate, SunStream Opportunities II LP, is anticipated to own non-voting and non-participating exchangeable securities in the SunStream USA entities.  

SunStream USA can now acquire certain non-performing credit investments from SunStream Opportunities LP – which is an affiliate of SunStream Bancorp. The move would result in majority equity positions in select assets of Surterra Holdings, Inc. – which is doing business as Parallel – and Greenpeak Industries Inc. – which is doing business as Skymint.

See also: Michigan’s Skymint Acquired Out Of Receivership

Why It Matters

Skymint operates within Michigan, while Parallel is a multi-state cannabis operator (MSO) with operations in Florida, Massachusetts, Nevada and Texas. Lume Cannabis Co is taking over a large cannabis grow operation near Lansing, previously operated by Skymint as it restructures, stepping away from cultivation to focus on its retail presence across the state.

The SunStream USA Group structure will allow SNDL to take a contingent indirect interest, on a pre-U.S. federal legalization basis, in certain U.S. assets that may be converted into common interests upon the U.S. federal legalization of the sale of cannabis products or enactment of other cannabis decriminalization having the same effect.

The evolution from the deployment of credit to structured contingent interests through the SunStream USA Group rebalances SNDL’s risk-reward exposure, which upon potential cannabis policy reform on the federal level, will provide SNDL with the ability to obtain investment interests across the capital structures of numerous cannabis multi-state operators (MSOs).

SunStream USA’s majority equity interests would rank it among the top 10 MSOs, the company said, allowing it to reach over 60 million consumers, with aggregate market sales of $5 billion.

“The establishment and Regulatory Compliance of the SunStream USA Group has unlocked a remarkable opportunity for SNDL, and we are now poised to restructure non-performing credit investments in SunStream Opportunities LP,” Zach George, CEO of SNDL, said.

With cannabis rescheduling seeming to be right around the corner, SNDL's U.S. business strategy doesn't come as a surprise.

"This initiative creates attractive optionality for SNDL upon federal legalization to deploy additional investment capital into the SunStream USA Group structure, improving the return potential of attractive U.S. cannabis assets in growing markets.” George, who shared his valuable business insights at previous Benzinga cannabis events, said.

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What's Next

SNDL expects to provide a further update on the Parallel and Skymint transactions alongside its second-quarter 2024 financial and operational results.

SunStream USA is anticipated to be a majority owner in U.S. cannabis companies having assets in five U.S. states, including Florida, Massachusetts, Nevada, Texas and Michigan.

Now read: Skymint Closes Down Lansing Grow Facility: What’s Next For Michigan’s Once Leading Cannabis Producer?

SNDL Price Action

SNDL's shares traded 3.8288% higher at $2.305 per share at the time of writing on Thursday.

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Posted In: CannabisM&ANewsBenzinga Cannabis Capital Conferencecannabis reschedulingmarijuana reschedulingParallelRestructuringSkymintSunStream BancorpSunStream USAZach George
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