US Cannabis Breeders and Dealer On Monday, Harvest Health & Recreation (OTC: HRVSF) said it agreed to acquire Illinois-based peer Verano Holdings in a joint venture worth $ 850 million, the last multimillion dollar agreement for a US marijuana industry that has not yet been fully legalized. Marijuana shares on US stock exchanges were mixed.
The agreement is expected to close in the first half of this year. It would give Harvest licenses that "allow it to operate up to" 200 facilities, including 123 dispensaries, in the United States, the company said in a release. The deal will also give Harvest access to 15 US states and Puerto Rico.
The acquisition comes as US marijuana companies are trying to gobble up retail square footage, expand adult space and horde the licenses that allow them to develop more of each in recent legal states. Last year, California-based cannabis dealer and producer MedMen came in to buy PharmaCann, a medical marijuana company, for $ 682 million.
Country Grab & # 39;
The roots of the agreement, said Harvest's CEO Steve White in an interview, traced back to a conversation in the summer, when representatives from Verano visited Harvest in Arizona. The two companies kept in touch and struck the deal among what he described as a "land grab" among rivals.
"We had told people as early as last summer that we needed to come meaningfully into a few states, Illinois being great," White said. "And we struggled with the right way to do that. Then we ended up picking up this dialogue again with Verano, and it checks many boxes for us, including a truly meaningful entry in the Illinois market."
Illinois legalized medical marijuana in 2013. In November, JB Pritzker, who wants to legalize recreational marijuana, was elected governor. Canaccord analysts in November said that Illinois "has the potential to be a meaningful shrimp market in the not-so-distant future."
In the disk, Harvest jumped 12% on the stock market today. MedMen (OTC: MMNFF) was flat. Among other US marijuana stocks trading over the counter, Curaleaf (OTC: CURLF) rose 2.6%. Acreage Holdings (OTC: ACRGF) increased 4.4%.
During the interview, White said that 123 dispensaries could run within two to three years. He said the company would "quickly" add stores in Pennsylvania and Florida.
Harvest, in the release, also said that it is expected to have more than 70 dispensers, 13 cultivation plants and 13 online production facilities by the end of this year.
In the short term, the combined company will be smaller. It would probably drive 30 dispensaries, eight cultivation plants and seven production centers, Harvest said in the release. The combined company will retain its operational hubs in Arizona and Illinois.
Harvest is currently running nine stores in Arizona, White said. It has a store each in Pennsylvania, Maryland, Florida and California. Veran's existing retail print is much smaller. Verano has licenses for 12 stores in Nevada, most of them recently purchased.
The two sides, White said, agreed on the companies' relative valuations when they met in Arizona.
"It was a very simple, five-minute conversation where we began to get to know each other and began to like each other," he said.
Verano cultivates, processes and sells cannabis in Illinois.
National Brands? 19659006] Verano has licenses or operations in around 11 states and other territories in the United States, and also monitors a handful of labeled cannabis products, Harvest, in the release announcing the deal, called out the potential to "create truly national brands" by plunging them into New Markets
Analysts say branded products are a key element for any legitimate potters' success, but at present, customers have little awareness or loyalty to these products. The popularity of a product in a state does not necessarily mean that it becomes popular in another state "The reason is that the industry is so young," White said in the interview. "You want some brand loyalty regionally, and maybe even municipal. But nationally there is no one out there who can say that they have created a mark of national consciousness at this point. "
The price tag of the Verano agreement is also massive compared to the Harvest economy. In the nine months last year that ended September 30 , Harvest brought in around $ 30 million in sales, the company's net income over that time came in at $ 3.6 million, which had cash and cash equivalents of around $ 28 million
For the quarter ended September 30, Harvest posted a loss at $ 453,004 on revenue of about $ 11,2 million.
Marijuana Stocks Mixed
Among major US-US Marijuana shares, Aurora Cannabis (ACB) received 2.6%. Canopy Growth (CGC) crept up 1.4%. Tilray (TLRY) was flat. Cronos Group (CRON) tumbled 3.8% after an analyst downgrade.
CannTrust (CTST) recorded 622%. 4] Aphria (APHA) gained 1.7%.
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