Curaleaf to Acquire Grassroots in US$875 Million Deal

Curaleaf Holdings (CSE:CURA,OTCQX:CURLF) solidified itself as a standout in the US cannabis market after it announced on Wednesday (July 17) its acquisition of the privately-held GR Companies (Grassroots) valued at US$875 million.

The deal has resulted in Curaleaf now calling itself the world’s largest cannabis company by revenue and the largest in the US across some operating metrics.

The cash and stock agreement is expected to close in early 2020 pending approval from shareholders as well as the board of directors from both companies. The deal has brought together “the largest public and largest private multi-state operators in the US,” the press release reads, to offer cannabis products to customers across the country.

With the acquisition, Curaleaf is getting control of Grassroots’ 61 dispensary licenses, 20 of them currently in operation, as well as 17 cultivation and processing licenses. After the merger, Curaleaf’s presence will expand to 19 states from 12. The newly combined company will have 131 dispensary licenses, 68 physical locations, 20 cultivation sites and 26 processing facilities.

Along with Grassroots’ entire portfolio, Curaleaf is also gaining access to new markets, including Illinois, which became the 11th state to legalize recreational cannabis use last month, and Pennsylvania.

The transaction puts Curaleaf in the top position among multi-state operators (MSOs) in the US now that the company has extended its reach into Arizona, California, Nevada and Ohio.

In a press release, Curaleaf CEO Joseph Lusardi said of the transaction, “(It) significantly accelerates our expansion strategy and strengthens our reach across the medical and adult-use markets.”

He added that the deal will enhance the depth of Curaleaf’s wholesale and retail platforms across the US.

This isn’t the first big move the US-based cannabis retailer has made this year. In May, it announced the acquisition of Cura Partners, owner of the Select brand of cannabis products, in an all-stock deal valued at US$948.8 million (C$1.27 billion). The deal will close sometime this year and includes Select’s adult-use cannabis products as well as all of its operations, covering manufacturing, distribution and marketing.

Robert Fagan, an analyst at GMP Securities, told the Investing News Network (INN) that the merger has given Curaleaf “a true national presence” in the US cannabis space.

“In every important state, (it has) assets now that are operational and generating revenues … whereas in some instances, other competitors have license holdings in certain states, but don’t don’t have anything operational,” Fagan said.

He added that, while recreational cannabis use still isn’t legal at the federal level in the US, the markets that exist within individual states are robust. For Fagan, this merger is a prime example of the growing interest in the US cannabis industry.

“Pretty big acquisitions are being made, large amounts of money are exchanging hands and all that without a federally permitted marketplace,” he told INN.

Once the transaction closes, Grassroots’ co-founder and CEO Mitch Kahn will serve on the Curaleaf board of directors. Matt Darin and Steve Weisman, Curaleaf’s co-founders, will join the senior management team.

The company’s Q1 results for 2019 reported Curaleaf’s total revenue at US$35.25 million, up from the US$31.96 million in the previous quarter, an increase of 10 percent.

Curaleaf share prices jumped Wednesday, closing at C$9.95, an increase of over 17 percent from Tuesday’s closing price of C$8.49. Shares rose again today, opening at C$10.19. The company’s market cap currently sits at C$3.61 billion.

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Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.

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