(This story has been updated to include quotes from company officials and an analyst. For more analysis of this deal, sign up for our new premium subscription service, Investor Intelligence.)
Arizona-based Harvest Health & Recreation reached a binding agreement to acquire Verano Holdings of Chicago for $850 million, a deal that’s considered to be the largest acquisition inked in the U.S. cannabis industry to date.
The deal surpasses the previous record for a U.S. acquisition in the cannabis industry – MedMen’s $682 million all-stock purchase of PharmaCann in October.
Both acquisitions are a sign that M&A activity will remain brisk in the cannabis industry, with more blockbuster deals down the road.
Upon closing, the all-stock deal with Verano will give Harvest one of the largest footprints among multistate cannabis operators with 123 dispensaries in 16 states.
“The acquisition is the next step in Harvest becoming the largest cannabis company in the world,” Harvest CEO Steve White said during an investor conference call.
Verano, which acquired a Massachusetts cannabis company in February, was attractive to Harvest because it has stakes in 10 operating facilities across the United States and more than 45 licenses under development.
Harvest trades on the Canadian Securities Exchange as HARV.
Under terms of the deal, which is set to close in the first half of the year, Harvest is set to acquire:
- Licenses and operations in 11 states and territories, including seven cultivation licenses, 37 retail licenses and the potential to reach more than 150 million Americans.
- Portfolios of proprietary brands with more than 150 product SKUs sold in 150 retail location.
- Cultivation operations in Illinois, Maryland and Nevada with expansion capacity of 900,000 square feet.
All told, the deal puts Harvest on pace to have more than 70 dispensaries, 13 cultivation facilities and 13 manufacturing facilities operating by the end of 2019, according to a news release from the company.
Details of the management team following the deal’s closure are still being worked on, said White, the Harvest CEO.
“This really is a group of non-ego-based individuals, and we are working through that as we speak,” he added.
The two companies first began talking about a potential merger in the summer of 2018.
The newly merged business will be “immediately accretive,” Harvest President Steve Gutterman said during the call.
George Archos, founder, chairman and CEO of Verano Holdings, predicted, “It will be an easy process to join with the Harvest brands.”
Verano currently has dispensary operations in Illinois, Maryland, Nevada and Oklahoma, Archos noted, with permits and construction underway in Massachusetts and Ohio.
More cannabis-related acquisitions are expected.
“We believe the magnitude of this deal underscores the rapid pace in which the U.S. cannabis industry is evolving and may serve as a catalyst for further large-scale consolidation,” Matt Karnes, founder and managing partner of GreenWave Advisors, told Marijuana Business Daily.
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