The Valens (VLNS), a manufacturer of cannabis products, announced Tuesday that it has entered into an agreement to acquire Citizen Stash Cannabis in an all-stock transaction valued at approximately C$54.3 million. Citizen Stash shareholders will receive 0.1620 of a VLNS share for each Citizen Stash common share held.
The acquisition will strategically accelerate Valens’ entry into the approximately C$2.7-billion flower-based market. (See The Valens stock charts on TipRanks)
The Valens CEO, co-founder and chair Tyler Robson said, “We are excited to join forces with Citizen Stash’s experienced team and broaden our offerings in the flower and pre-roll verticals with a best-in-class brand. The premium price tier of the flower and pre-roll segments represents the best expansion opportunity for Valens in the flower category, as premium brands are the hardest to build, while also capturing the highest margins.
“Citizen Stash’s asset light model, and proprietary genetics will provide us significant operational flexibility and an opportunity to leverage the growing capabilities of our existing LP partners.”
Robson added that the strategic acquisition will allow Valens to significantly expand its presence in the recreational market, and capture a share of the largest categories of the Canadian cannabis space, without the burden of a high-cost growing infrastructure. The company is opportunistically expanding its product offering to align with consumer demand for high-quality craft cannabis flower and pre-rolls.
Two months ago, Desjardins analyst John Chu maintained a Buy rating on the stock, and raised its price target to C$4.25 (from C$3.75). This implies 40.7% upside potential.
Overall, the consensus is that VLNS is a Strong Buy, based on three Buys. The average The Valens price target of C$4.83 implies upside potential of 61.7% to current levels. Shares have gained nearly 80% year-to-date.