Merger of hemp cigarette makers aims to create nicotine alternative powerhouse
TAAT Lifestyle and Wellness is looking to bring hemp cigarette maker Redwood Reserves into its portfolio. The company issued a letter of intent in late July to acquire Redwood in a cash-and-stock transaction of $1.15 million and 2.4 million shares common shares in TAAT.
TAAT said the acquisition is aimed at streamlining its manufacturing capacity and to gain an established distribution network for its Beyond Tobacco brand of hemp cigarettes, which it is planning to launch in Q4 of 2020. Currently, Redwood’s product line is sold in more than 1,600 smoke shops and convenience stores in New York, Los Angeles, Dallas, Chicago, Boston and San Francisco and is carried by several distributors while also being sold on Redwood's website.
“We’re enthusiastic about acquiring Redwood for many reasons”, said Joe Deighan, founder of TAAT. “Their organically grown proprietary strains of hemp have earned Redwood a loyal base of followers, in addition to strong relationships with retailers and distributors. Aside from that, having access to their production capacity can improve our production timelines for Beyond Tobacco and reduce costs considerably. … I believe Beyond Tobacco can prosper in combined marketing and distribution efforts with Redwood’s product line, which is already highly sought-after. We look forward to exploring these synergies as we get closer to the planned Q4 2020 launch of Beyond Tobacco.”
Redwood, which is currently led by co-founders Ana Redwood, COO, and Dennis Grayson, CEO, was started in 2019 in Portland, Ore. The vertically integrated company, which grows its three proprietary strains of hemp — Carolina Dream, Golden Redwood and Wild Bourbon, plus its Redwood Reserve blend — in the Willamette Valley and sells hemp cigarettes in a stick format with cigarette-style packaging. It also sells pre-rolled joint-style cigarettes, single-gram dabs and flowers in 3.5-gram and 7-gram units.
Redwood has a production capacity that TAAT believes will reduce its manufacturing costs for Beyond Tobacco by as much as 50%. It also recently published a study of the benefits of hemp cigarettes for smoking cessation, which TAAT said could offer late-stage insights for product changes ahead of Beyond Tobacco’s launch. Redwood also has a notable online footprint, with TAAT noting that its online store’s sales were 421% higher in June 2020 than in November 2019, the second month it was in business.
“The emergence of the hemp industry in the United States took place very rapidly, and building the Redwood brand as an icon of Oregon’s one-of-a-kind hemp ecosystem was very exciting to do,” Grayson said. “This acquisition deal with TAAT reflects both how far we have come as a business, and how bustling our industry has become with the many popular applications of hemp, whether recreational or medicinal. TAAT is on the verge of introducing its Beyond Tobacco line of hemp cigarettes, which we firmly believe is ideally positioned to compete effectively in the $814 billion worldwide tobacco cigarette market.”
The companies said they expect to negotiate and settle on a definitive agreement for execution by July 31, at which point Redwood will become a wholly owned subsidiary of TAAT.