Cannabis site Leafly to go public via SPAC merger

FILE PHOTO: Cannabis stickers on a Weed World store window are pictured the day New York State legalized recreational marijuana use amid the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., March 31, 2021. REUTERS/Carlo Allegri/File Photo

(Reuters) - Top cannabis-focused website Leafly on Monday agreed to go public by merging with a blank-check firm owned by one of its biggest backers, Merida Capital Holdings, in a deal valuing the combined company at about $532 million.

Like the rest of the cannabis industry, Leafly has benefited from prospects of federal marijuana legalization in the United States and a pandemic-induced jump in pot use. Its site visits rose 12% last year to more than 220 million, making it the world’s most visited website on weed.

The deal with blank-check firm Merida Merger Corp I has an enterprise value of about $385 million and was first reported by Reuters last week.

It gives Seattle-based Leafly proceeds of up to $161.5 million that it can use to expand its business in newly legalized markets such as New York, Chief Executive Officer Yoko Miyashita said in an interview.

“We can grow even in the (COVID-19) constrained environment, let’s put capital on the balance sheet today to accelerate our growth coming out of this,” Miyashita said.

Leafly broke even at the end of last year and expects 2021 and 2022 to be “growth and investment periods,” she said. The company has estimated revenue to rise 19% year-over-year in 2021, followed by a 52% rise in 2022.

Existing Leafly shareholders will own about 72% of the combined company after the deal, which is expected to close in the fourth quarter of this year. Leafly will be listed on the Nasdaq under the ticker symbol “LFLY.”

Blank-check firms like Merida Merger, or special purpose acquisition companies (SPACs), use the capital raised through their initial public offerings to buy and merge with a private company, in a deal that then takes it public.

Reporting by Sahil Shaw and Shariq Khan in Bengaluru; Editing by Aditya Soni