TerrAscend Corp. (TER), an integrated cannabis company operating in Pennsylvania, New Jersey, and California, announced Wednesday that it has entered into an agreement to acquire Gage Growth Corp. (GAGE) in an all-stock deal valued at approximately C$545 million. Gage shareholders will receive 0.3001 of a TerrAscend share for each Gage share held.
The transaction will expand TerrAscend’s operations to include a total of five U.S. states and Canada, with 23 operating dispensaries and seven cultivation and processing facilities.
It will also give TerrAscend access to many top brands, including licensing partnerships in Michigan with COOKIES, SLANG Worldwide, and Blue River.
“The acquisition of Gage expands our footprint to the third-largest cannabis market in the U.S.,” said TerrAscend executive chairman Jason Wild. “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.”
The transaction is expected to close in the first half of 2022, subject to regulatory approvals.
On August 20, Craig-Hallum analyst Eric Des Lauriers maintained a Buy rating on TER but lowered its price target to $13.50 (C$17.04) following production disruption in Pennsylvania during Q2. This implies 93.4% upside potential.
Des Lauriers told investors in a research note that TerrAscend’s exclusive New Jersey production, and manufacturing agreement with the cannabis brand COOKIES, further solidifies the company as his top choice for New Jersey. These boons should increase foot traffic to stores, and more closely align the business with high volume, high LTV customers.
Overall, consensus on the Street is that TER is a Strong Buy based on seven Buys. The average TerrAscend Corp price target of C$16.18 implies 83.7% upside potential to current levels.