US pot firm Har­vest eyes IPO

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TORONTO — US cannabis re­tailer Har­vest En­ter­prises Inc is set to raise US$230 mil­lion (C$303 mil­lion) in a deal that would value the com­pany at about $1.5 bil­lion when it goes pub­lic in Toronto as early as next week, peo­ple fa­mil­iar with the sit­u­a­tion said on Thurs­day.

The Tempe, Ari­zona-based com­pany had ini­tially tar­geted $50 mil­lion through the of­fer, but in­creased the deal value to $230 mil­lion in re­sponse to strong de­mand, the peo­ple said. The of­fer, which is set to be priced at $6.55 per sub­scrip­tion re­ceipt, is ex­pected to close as early as this week. A sub­scrip­tion re­ceipt can be ex­changed for shares when the com­pany goes pub­lic.

An ex­ter­nal spokesman for the com­pany de­clined to com­ment on the de­tails of the of­fer­ing. The sources de­clined to be iden­ti­fied as the in­for­ma­tion is not pub­lic.

Har­vest plans to list on the Cana­dian Se­cu­ri­ties Ex­change (CSE) through a re­verse takeover (RTO).

“The level of in­ter­est is high,” the com­pany’s chief ex­ec­u­tive, Steven White, a for­mer lawyer who helped found Har­vest in 2011, said.

While fed­eral il­le­gal­ity cur­rently casts a shadow over the US mar­ket, “every­body un­der­stands that the US mar­ket is go­ing to be the big­gest mar­ket glob­ally in the fore­see­able fu­ture,” he added.

The United States is ex­pected to ac­count for over three-quar­ters of global le­gal cannabis sales over the next three years, ac­cord­ing to Ar­cview Mar­ket Re­search and BDS An­a­lyt­ics.

A raft of US-based cannabis re­tail­ers and pro­duc­ers have opted to go pub­lic in Canada to fund their rapid growth as ac­cess to cap­i­tal re­mains tight for the in­dus­try in the United States.

Har­vest’s com­peti­tors, in­clud­ing Med­men En­ter­prises, Green Thumb In­dus­tries and Cu­raleaf Hold­ings, have all listed on the CSE this year through re­verse takeovers.

An RTO al­lows a com­pany to go pub­lic by rolling into a listed shell cor­po­ra­tion, which typ­i­cally has a faster time­line than a tra­di­tional ini­tial pub­lic of­fer­ing.

Har­vest ex­pects to have about 16 stores open by the end of 2018 and 50 by 2019, from nine now, ac­cord­ing to a con­fi­den­tial in­vestor pre­sen­ta­tion doc­u­ment re­viewed by Reuters.

Har­vest projects earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­sa­tion of $226 mil­lion on rev­enue of $559 mil­lion in 2020, the pre­sen­ta­tion showed. Its val­u­a­tion mul­ti­ple, at about 6.7 times the pro­jected 2020 EBITDA, is lower than some of its peers.

Cu­raleaf’s of­fer­ing last month val­ued it at $4 bil­lion, or 12.4 times its pro­jected 2020 EBITDA.

Cannabis stocks re­ceived an added boost this week on voter ap­provals of med­i­cal cannabis in Mis­souri and Utah and recre­ational mar­i­juana in Michi­gan, and on the fir­ing of US At­tor­ney Gen­eral Jeff Ses­sions, a staunch op­po­nent of fed­eral le­gal­i­sa­tion.

Eight Cap­i­tal, GMP Se­cu­ri­ties and Canac­cord Ge­nu­ity are the lead banks ad­vis­ing Har­vest. — REUTERS

Plantron­ics Inc, a US man­u­fac­turer of Blue­tooth ear­pieces and gam­ing head­sets, is ex­plor­ing op­tions that in­clude a po­ten­tial sale of the com­pany af­ter at­tract­ing takeover in­ter­est, peo­ple fa­mil­iar with the mat­ter said on Thurs­day.

A sale of Plantron­ics would come on the heels of the com­pany’s US$2 bil­lion ac­qui­si­tion in July of US video­con­fer­enc­ing equip­ment maker Poly­com Inc. It would un­der­score the scope for con­sol­i­da­tion in the sec­tor, as tele­phony equip­ment be­comes more com­modi­tised and com­pe­ti­tion in­creases.

There is no cer­tainty that Plantron­ics’ sale dis­cus­sions will re­sult in any deal, said the sources, who asked not to be iden­ti­fied be­cause the de­lib­er­a­tions are con­fi­den­tial.

Plantron­ics de­clined to com­ment.

Plantron­ics shares were trad­ing down 11 per cent on Thurs­day be­fore news broke of the com­pany’s ef­forts to sell it­self, as in­vestors digested the com­pany’s sec­ond-quar­ter earn­ings this week that missed an­a­lyst ex­pec­ta­tions.

The shares re­versed course fol­low­ing the Reuters re­port and were trad­ing up 6.3 per cent at $62.89 in af­ter­noon trad­ing in New York on Thurs­day, giv­ing the com­pany a mar­ket cap­i­tal­i­sa­tion of $2.5 bil­lion.

Santa Cruz, Cal­i­for­nia-based Plantron­ics makes uni­fied com­mu­ni­ca­tions sys­tems, wire­less head­sets, con­fer­enc­ing sys­tems, and some soft­ware, which it sells to busi­nesses and con­sumers. It faces com­pe­ti­tion from new ri­vals en­ter­ing the mar­ket for head­sets, in­clud­ing Cisco Sys­tems Inc.

Founded in 1961, Plantron­ics’ first prod­ucts were light­weight head­sets for air­line pi­lots. It later be­came known for sell­ing head­sets to the Na­tional Aero­nau­tics and Space Ad­min­is­tra­tion (NASA), in­clud­ing the ones worn by Neil Arm­strong dur­ing his first moon­walk in 1969.

Pri­vate eq­uity firm Siris Cap­i­tal Group LLC owns 16 per cent of Plantron­ics, mak­ing it its largest share­holder.

Plantron­ics ac­quired Poly­com this year to ex­pand its of­fer­ings of busi­ness com­mu­ni­ca­tions equip­ment and add video com­mu­ni­ca­tions ca­pa­bil­i­ties to its prod­uct mix. The deal roughly dou­bled Plantron­ics’ rev­enues to around $483 mil­lion in the sec­ond quar­ter. — REUTERS

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