MJ Freeway and MTech Acquisition plan merger, Nasdaq listing

(This story has been updated with more details about MTech Acquisition and comments from its chief financial officer.)

MJ Freeway and MTech Acquisition are merging, with plans to launch a new holding company set to list on the Nasdaq.

Under the deal, Denver-based MJ Freeway and MTech (Nasdaq: MTEC) will become subsidiaries of a newly created company temporally dubbed Pubco. That name that will change before the firm is listed, company officials said.

The merger, which is subject to approval by equity holders of each company, is slated to close in early 2019, the firms announced in a news release Thursday.

The deal’s price tag wasn’t disclosed.

Launched in 2017, Florida-based MTech is the first U.S.-listed, special-purpose acquisition company (SPAC) focused on acquiring marijuana ancillary businesses.

The company is led by the founders and leaders of cannabis venture capital fund Hypur Ventures, including:

  • Chairman Steve Van Dyke, a co-founder and chairman of Hypur.
  • CEO Scott Sozio, a co-founder and managing director at Hypur.
  • Chief Financial Officer Tahira Rehmatullah, a managing director of Hypur.

The company in January completed a $50 million public offering and Nasdaq listing and has been on the hunt for its first major deal since, said Rehmatullah.

“When we launched MTech, we specifically said we wanted to focus on acquisitions in the tech software and data solutions space,” she said.

“When you think about what drives the technology ecosystem – the need to reduce expenses, increase value for the end customer and allow companies to function more efficiently – MJ Freeway’s platforms are doing exactly that.”

The combination follows a $10 million funding round that MJ Freeway closed in September.

The point-of-sale system and government traceability software provider has clients in 23 states and the District of Columbia as well as Australia, Canada, Europe, South America and Switzerland.

“With access to public capital markets and additional balance sheet strength as a result of this transaction, MJ Freeway will accelerate its growth and broaden its product offering as we strive to meet the ever-expanding demands of a highly complex and heavily regulated industry,” Jessica Billingsley, MJ Freeway’s co-founder and CEO, said in the release.

After the merger, MJ Freeway equity holders will get new shares of Pubco valued at $70 million, according to terms of the deal.

MTech security holders will swap their shares for Pubco shares.

Once the deal closes, the newly formed company expects to be debt-free with more than $60 million in cash on its balance sheet.

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