Coastal Holdings Company, a Santa Barbara-based cannabis dispensary and delivery operator, was purchased by The Parent Company, a publicly traded cannabis firm backed by the rapper Jay-Z, in a deal worth as much as $56.2 million.
According to details of the transaction, which The Parent Company announced Oct. 4, The Parent Company is seeking to acquire 100% equity in Coastal for $16.2 million in cash, $20 million in stock, contingent upon signing management services agreements at each Coastal location, and another $20 million in stock contingent upon the successful transfer of Coastal’ s cannabis licenses.
The Parent Company will also inherit a minority stake in another Southern California dispensary and an option to purchase the remainder of that dispensary for $9 million in cash, $4.5 million of which was prepaid upon execution of the prior contingents, according to the press release.
The deal is expected to close sometime in 2022.
“I am thrilled to add Coastal to our expanding retail network,” Troy Datcher, CEO of The Parent Company, said in a news release. “With strategically positioned locations in high-traffic, densely populated regions, Coastal enables us to significantly increase our reach to a broader potential audience of consumers with both in-person retail and delivery options. In just over four months, we have more than tripled our operating retail stores in California.”
Upon completion of the deal, The Parent Company will have 11 retail stores and six delivery depots in California, the company said.
Founded in 2018, Coastal operates five storefronts, including one in downtown Santa Barbara, and two delivery depots, one in Santa Barbara and the other in San Luis Obispo.
The Parent Company is based in the San Francisco Bay Area. Shawn “Jay-Z” Carter is the company’s “chief visionary officer” and was an early investor, and the CEO of his company Roc Nation is on The Parent Company’s board. The Parent Company has a social equity ventures fund, seeded with $10 million along with 2% of the company’s net income, to invest in cannabis entrepreneurs of color.
The Parent Company went public in Canada on the NEO Exchange through a Special Acquisition Purpose Company on Jan. 11, 2021, in what was announced as the largest cannabis SPAC deal in history.
After its debut, The Parent Company had a market capitalization of more than $1 billion, the company said. Shares of The Parent Company have declined mightily since going public, however. The stock opened at $12.70 Jan. 11, but closed at $3.07 on Oct. 8, a loss of about 76% over the course of nearly nine months.