California cannabis company Glass House has agreed to go public in a $567 million deal. It will be acquired by Mercer Park Brand, a Canadian special-purpose acquisition vehicle (SPAC), likely in the first half of this year.
Glass House is one of the largest cannabis companies in California. It currently oversees more than 500,000 square feet of cultivation crops and produces more than 110,000 pounds of dried flowers. Additionally, it runs four dispensaries and is active in the cannabis wholesale sector. Year-on-year revenue grew by 185% to $53 million in 2020.
Following the sale, “Glass House Group is poised to become the largest, vertically integrated brand-building platform in California,” Jonathan Sandelman, the chairman of Mercer Park, said in a statement.
“When we formed Mercer Park BRND, we aimed to create a platform that could launch the first national cannabis brands in the United States,” he continued.
The acquisition of Glass House includes all of its brands: Glass House Farms, Forbidden Flowers, and Mama Sue. Glass House Farms had a 4% market share at the end of 2020 and is aimed at the average, everyday cannabis consumer. Forbidden Flowers and Mama Sue have more targeted demographics and other product offerings, including THC flower, hemp flower, and tinctures.
The deal extends to two other players in California’s cannabis industry, Retailer Element 7 and Southern California Greenhouse. Glass House will merge with both of these companies within the next year, according to the deal.
Glass House itself is valued at $325 million in the deal. Retailer Element 7 and Southern California Greenhouse are priced at $24 million and $219 million respectively.
Retailer Element 7 will provide an additional 17 dispensary locations in addition to the existing 4. Through the merger with Southern California Greenhouse, Glass House will gain 5.5 million square feet of cultivation space.
“This additional capacity is expected to increase Glass House’s current footprint to up to approximately 2.5 million square feet by 2023. The Company’s total, targeted long-term footprint of 6 million square feet is expected to be by far the largest cultivation capacity in California,” said the joint statement by Mercer Park and Glass House.
Okta shares dropped nearly 10% Thursday following a quarterly outlook that missed Wall Street’s estimate while the identity-authentication software maker said it plans to buy rival Auth0 in a $6.5 billion stock deal.
The company late Wednesday projected a first-quarter adjusted loss of $0.20 to $0.21 per share, which was wider than the consensus estimate of a per-share loss of $0.07. It also expects year-over-year growth in total revenue to $237 million to $239 million compared with Wall Street’s view of $237 million.
Shares of Okta lost as much as 9.6% when it hit an intraday low of $218. The stock later pared the decline to 4.5%. Over the past 12 months, the shares have advanced about 79%.
The company’s projection came within its fourth-quarter financial report and alongside a separate announcement about planning to buy Auth0. Okta said its guidance does not include any potential impact from the proposed Auth0 deal.
Okta said the pending deal will stoke growth in the $55 billion identity market. Auth0 will run as an independent business unit inside of Okta and both of its platforms will be supported and integrated over time.
The transaction “will accelerate our innovation, opening up new ways for our customers to leverage identity to meet their business needs,” said Todd McKinnon, Okta’s CEO and co-founder, in the statement.
For the fourth quarter, the company posted adjusted earnings of $0.06 a share, swinging from a loss of $0.01 a year ago. Revenue of $234.7 million increased from $167.3 million in the same period a year ago.
Warren Buffett’s Berkshire Hathaway suffered a 9% decline in operating earnings last year as the COVID-19 pandemic caused widescale disruption to its business, its fourth-quarter earnings revealed on Saturday.
The famed investor’s conglomerate owns scores of businesses including Geico, See’s Candies, and the Burlington Northern railroad. It also holds multibillion-dollar stakes in public companies such as Apple, Bank of America, and Coca-Cola.
Berkshire’s revenues only slid 4% last year, but its investment gains slumped by more than 40%, slashing its net earnings to about $43 billion.
The company generated slimmer profits from its insurance division’s investments, its railroads, and its manufacturing, service, and retail businesses. However, it earned more income from utilities and energy, as well as insurance underwriting.
Berkshire boasted $138 billion in cash and short-term investments at the end of December, underscoring its failure to make the “elephant-sized” acquisition that Buffett has been hunting for several years now.
Precision Castparts – Berkshire’s last big acquisition, bought for $37 billion in 2016 – posted a 29% slump in revenue and a 65% plunge in pre-tax earnings in 2020.
Buffett wrote down the value of the manufacturing subsidiary by $10 billion, citing question marks around the timing and scale of the recovery in the commercial-airline and aerospace industries as vaccines are rolled out globally.
The investor admitted Berkshire paid too much for the business in his annual letter on Saturday, calling the deal terms a “big” error on his part.
Buffett’s company spent about $7.8 billion on stocks last quarter, which included Chevron, Verizon, and Marsh & McLennan. It sold a little over $10 billion worth of stock, as it cashed out some of its massive Apple stake and slashed its positions in JPMorgan and Wells Fargo.
Berkshire’s investment moves last quarter mean it spent about $30 billion in total on stocks last year. However, it sold about $39 billion worth, making it a net seller to the tune of roughly $9 billion in 2020.
Buffett’s company repurchased the equivalent of 81,000 of its “A” shares – or nearly 5% of its total shares outstanding – for $24.7 billion in 2020. That included $8.8 billion in buybacks last quarter alone, just shy of the record $9 billion worth in the third quarter.
As New York looks to legalize cannabis, companies are already making deals to enter what could be one of the largest markets in the US.
On Thursday, MedMen and Ascend Wellness said that they’d reached an agreement for Ascend to take a majority stake in MedMen’s New York operations. Following the $73 million deal, Ascend will hold an 86.7% stake in MedMen’s New York assets and have an option to acquire the rest.
Struggling companies that operate in New York’s medical cannabis market could be attractive acquisition targets for companies looking to enter New York, experts told Insider.
MedMen has struggled to turn its operations around in recent years and analysts have pointed to the possibility of such a sale as the company looks for ways to stabilize its balance sheets. Recently, MedMen hired investment bank Moelis & Company to look at “strategic alternatives.” Moelis served as the financial advisor to MedMen in this deal.
Shares of Cooper Tire & Rubber Company surged 27% on Monday on news that Goodyear Tire & Rubber Company is buying it for $2.8 billion, solidifying Goodyear’s spot as the reading company in the US market.
Goodyear shares traded 16% higher.
Cooper shareholders will receive $41.75 per share in cash and 0.907 shares of Goodyear common stock per Cooper share, amounting to $2.8 billion. This will roughly be about $54.36 per share in total, according to a release from the companies on Monday.
Goodyear shareholders will own around 84% of the combined company while Cooper shareholders will own approximately 16%. The deal is expected to close in the second half of 2021, the companies said.
“The addition of Cooper’s complementary tire product portfolio and highly capable manufacturing assets, coupled with Goodyear’s technology and industry-leading distribution, provides the combined company with opportunities for improved cost efficiency and a broader offering for both companies’ retailer networks,” Richard J. Kramer, Goodyear chairman, chief executive officer, and, president said in a statement.
The merger will expand Goodyear’s product offering and will also create a stronger American-based manufacturer with an increased presence in distribution and retail channels. In China, the merger will nearly double Goodyear’s presence.
The combination of the two companies, both based in Ohio, will build on Goodyear’s original equipment and premium replacement tires and Cooper’s light truck and SUV segments.
Goodyear is one of the world’s largest tire companies, doing business in 21 countries. Cooper meanwhile, is the fifth largest tire manufacturer in North America by revenue and is present in over 15 countries.
While the tire industry is still recovering from the decline in sales during the pandemic, the combined company will have approximately $17.5 billion in pro forma 2019 sales, release published on Monday.
Dealmaking got off to a rough start in 2020, with mergers and acquisitions temporarily going over a cliff in the springtime as the world was met with a series of lockdowns and harsh restrictions to confront the spread of the coronavirus.
But by late summer and into the autumn, activity roared back, albeit with some notable differences – such as virtual meetings in lieu of in-person management presentations, and limited celebratory fanfare for completed deals.
Ultimately, 2020’s M&A volumes were down just 5% compared to the year before.
To take a closer look at the people behind the numbers, Insider has partnered with MergerLinks, a financial intelligence platform that tracks deals and individual bankers, to present our second-annual edition of “The Rainmakers,” a league-table ranking of the top-20 M&A bankers based on the size of the deals they orchestrated in North America last year.
So who was the top rainmaker when it came to M&A in 2020?
While Goldman Sachs had the most representation with four bankers cracking the top-20, the No. 1 spot went to Anthony Armstrong, Morgan Stanley’s global head of technology M&A. Armstrong, who joined Morgan Stanley in 2015 after a long run at Credit Suisse, landed several megadeals in 2020, including a role advising chipmaker Nvidia on its $40 billion cash-and-stock acquisition of Arm Holdings, the the SoftBank-backed semiconductor giant.
If there’s one takeaway, it’s that there will be plenty of news, deals, and drama to keep tabs on. If you’re not yet a newsletter subscriber,you can sign up here to get your daily dose of the stories dominating banking and business.
M&A activity came surging back in the latter half of 2020. Now, Wall Street is primed for robust dealmaking in 2021.
A new regime in Washington could alleviate the apprehensions of some overseas buyers and spark renewed cross-border dealmaking activity, said Vito Sperduto, co-head of global M&A at RBC Capital Markets.
Cross-border transactions are likely to see a “significant uptick” once the administration of President-elect Joe Biden steps in, Sperduto said. While some international deals have happened in the past four years, “there already was a slowdown in cross-border transactions pre-pandemic,” he said, “and it’s just gotten worse.”
Hedge funds, on average, had a good year – the most recent Preqin data shows hedge funds are up more than 13% for the year after a strong November.
But performance wasn’t equal across all strategy types, with concentrated equity managers – especially those with big private-market bets– leading the way while well-known quants struggled. And a lot of those trends are expected to carry over through the new year.
Insider asked four fintech investors what they’re looking out for in 2021. All mentioned embedded finance as a major trend that’s likely to continue as fintechs, and those in other industries, look to expand the types of services they offer customers.
“I think we’re in a great rebundling,” Ashley Paston, an investor at Bain Capital Ventures, told Insider. “If you look in any fintech, they have expanded outside of their initial product to create more value for their end customer.”
Investors also see a rise of ‘finfluencers’ to help reach younger customers, especially after Step, a digital bank for teens, launched in partnership with TikTok star Charli D’Amelio. Since its rollout in October, the fintech has over 500,000 sign-ups and raised a $50 million Series B.
The past 12 months accelerated trends like mobile banking and digitization that have long been building in consumer banking. Both were part of a broader shift away from in-person branch visits as customers shunned human contact during the pandemic.
It’s no surprise, then, that as 2020 turns into 2021, predictions for what banks will prioritize revolve around further developing technological capabilities and online customer experience.
Digitization and cloud technology, as well as the broader consumer credit environment and cost-cutting measures, were top of mind when bank execs discussed their goals for the year ahead.
Many fintechs saw massive growth and adoption in 2020. There’s also been no shortage of funding. Private funding has surged with a record number of mega-rounds – $100 million and above – this year, according to a recent CBInsights report. And fintechs like Affirm and Marqeta are gearing up for IPOs.
Investors don’t see things cooling down any time soon.
“We’re very excited for some of our more mature companies for the exit environment that they’ll be seeing,” said Jay Ganatra, partner at PayPal Ventures, whose portfolio companies include personal finance app Acorns and earned wage access startup Even.
2020 was a big year for legal tech. As law firms and businesses across industries shifted to remote work, legal tech companies stepped in to offer digital solutions to help streamline the transition, from client relationship management to contract analysis.
Not since the last financial crisis has Jeff Feldman, a Chicago-based recruiter and consultant for financial advisors, seen such a frenetic year of activity.
This year has been his second-busiest on record by volume, bested only by 2009. And he doesn’t see that slowing down. Today, Feldman’s roster of clients includes wealth managers First Republic, LPL Financial, RBC Capital Management, and Rockefeller Capital Management.
“I think you’re going to see a lot of movement in the first half” of next year, Feldman said. “Because of the past six months, advisors have taken this time to educate themselves on new business models – and the competition.”
One big change from 2020 that’s likely here to stay is the efficiency that has been introduced in the IPO roadshow process, according to Jane Dunlevie, co-head of Goldman Sachs’ global internet investment banking.
Traditionally, bankers hit the road leading up to an IPO to court investors and generate buzz. But the pandemic forced bankers to find creative virtual solutions for engaging investors without meeting them face-to-face.
“It’s been highly productive,” Dunlevie said. “We’re getting roadshows done in fewer days, for the most part, so we can cut off one or two or even three days of meetings, and these IPOs are getting done I think incredibly successfully.”
Aspects of that will likely continue.
“Our expectation is to try and take the best of both worlds, if and as the world reopens,” she said. That might mean management teams hit up one or two large cities, but “we can probably take many of these efficiencies into processes going forward.”
Blank-check companies looking to merge with or acquire another company could drive $300 billion in M&A activity over the next two years, Goldman Sachs said on Monday.
About 205 special purpose acquisition companies have raised a record $70 billion in IPO proceeds year-to-date, representing a five-fold increase from 2019, strategists led by David Kostin wrote. SPAC IPOs this year account for 52% of the $124 billion raised via 356 US IPOs.
Three major factors drove investor interest in 2020, or what they called “the year of the SPAC.” These include a shift in focus from value stocks to growth stocks, retail investors keen on non-traditional and early-stage businesses, and a hunt for cash substitutes when key policy rates are near zero.
Goldman estimates that 205 SPACs will need to acquire a target in 2021 or 2022, based on their 24-month post-IPO expiration dates.
“If this year’s 5x ratio of SPAC equity capital to target M&A enterprise value persists, the aggregate enterprise value of these future takeover targets would be $300 billion,” the strategists said.
SPACs serve as a cheaper and faster alternative to the traditional IPO route as they are created solely to merge with or acquire other businesses, and take the merged entity public. Even after a SPAC goes public, it could take up to two years to find a desirable M&A target. If it doesn’t, the SPAC is liquidated, and funds raised are meant to be returned to investors.
2020 has seen prominent entrepreneurs, hedge-fund managers, and popular celebrities like Bill Ackman, Richard Branson, Michael Jordan, and Shaquille O’Neal become involved in SPACs, and the blank-check firms were led to market by investment banks like Morgan Stanley, Credit Suisse, and Goldman Sachs.
“We expect a high level of SPAC activity will continue into 2021,” Goldman Sachs said, and warned that weak post-acquisition returns represent a headwind to future SPAC issuance.