Sugarmade Targets Additional Acquisitions in Hydroponics Roll-Up Strategy

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NEW YORK, Dec. 03, 2019 (GLOBE NEWSWIRE) -- via NetworkWire – Sugarmade, Inc. (OTCQB:SGMD) (“Sugarmade”, “SGMD”, or the “Company”), a major supplier to the hydroponic cultivation and hemp sectors, is excited to announce that the Company continues to pursue an aggressive M&A roll-up strategy as it positions Sugarmade as the dominant entity in the hydroponics marketplace. Specifically, the Company is currently in preliminary talks with six hydroponic and agricultural supply targets in the U.S. and central Europe.

Management notes that ideal targets should have an EBITDA margin of at least 8%. The Company prefers to pay a reasonable multiple to revenue, with 10% in cash and 90% in stock for potential acquisitions, with precise terms dependent on market conditions. Sugarmade closed on its acquisition of BZRTH Inc., a marketer and manufacturer of hydroponic growth supplies, on Oct. 30, 2019, for roughly 1x revenue, integrating an annualized $33 million in revenues and an EBITDA margin of 5%, with revenues anticipated to continue to grow over coming quarters.

Sugarmade CEO, Jimmy Chan, noted, “We continue to position Sugarmade as a dominant entity in a market that promises aggressive growth as margins tighten for larger producers in the hemp and hemp-related space. The return on investment in this space is extremely appealing right now, and we believe that will continue to be the case as we pursue this strategy.”

In addition, the Company intends to revive its October 2018 Letter of Intent (“LOI”) to pursue the acquisition of Sky Unlimited (dba Athena United), a supplier of cannabis cultivation materials in the near term. Sugarmade plans to close the deal in Q1 2020. Sky Unlimited has annualized revenues of $33 million to $35 million and EBITDA margin of 11%.

Chan continued, “When we close the Sky Unlimited acquisition, we expect to have around $70 million in annualized revenues.”

Management notes that this strategy is also predicated on a planned uplisting to either the New York Stock Exchange or the Nasdaq before mid-year 2020.

Chan concluded, “The capital market is valuing publicly-traded hemp ancillary companies at 3x-5x revenue, while most of these companies are in the red. GrowGeneration just started trading on Nasdaq a few days ago with a market cap of $172 million. Our financial performance is tracking in a very similar profile at a discount of $160 million. We are targeting shareholder value and believe we have a strategy in place that offers a tremendous path forward.”

FORWARD-LOOKING STATEMENTS: This release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements also may be included in other publicly available documents issued by the Company and in oral statements made by our officers and representatives from time to time. These forward-looking statements are intended to provide management's current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. They can be identified by the use of words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "would," "could," "will" and other words of similar meaning in connection with a discussion of future operating or financial performance. Examples of forward-looking statements include, among others, statements relating to future sales, earnings, cash flows, results of operations, uses of cash and other measures of financial performance.

Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and other factors that may cause the Company's actual results and financial condition to differ materially from those expressed or implied in the forward-looking statements. Such risks, uncertainties and other factors include, among others. such as, but not limited to economic conditions, changes in the laws or regulations, demand for products and services of the company, the effects of competition and other factors that could cause actual results to differ materially from those projected or represented in the forward-looking statements.

Any forward-looking information provided in this release should be considered with these factors in mind. We assume no obligation to update any forward-looking statements contained in this report.

 

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Globe Newswire: 13:30 GMT Tuesday 3rd December 2019

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