Another major multi-billion-dollar merger has been signed in the cannabis industry. Cresco Labs (CSE: CL) and CannaRoyalty Corp/Origin House (CSE: OH) have announced that the two companies will be merging in what will be one of the largest public U.S. cannabis acquisitions in history. The total transaction, estimated at C$1.1 billion, would become one of the largest multi-state operators in the U.S. marijuana space.
“We are excited to welcome the Origin House team to the Cresco family. With the addition of Origin House and its vast distribution network in California, we will have access to incredibly valuable real-time market data and insight into consumer buying patterns that will inform our product development strategies and reinforce our brand strength. In addition to their brand building and distribution expertise, Origin House has a very experienced M&A, corporate development and capital markets team that will be extremely valuable as we continue to expand and add scale through additional transactions,” said Cresco Labs President and Co-founder Joe Caltabiano. “With respect to the capital markets impact, with the equity issued through this transaction, we expect to have substantially more shares in our float, which we believe will provide ample liquidity for larger institutional investors looking to deploy capital into the cannabis space. We expect that our larger scale and improved liquidity following this acquisition will positively impact our ability to attract a larger universe of potential investors and reduce our cost of capital in the future.”
According to the agreement, Origin House shareholders will receive 0.8428 Cresco shares for each share of Origin House they own as the agreement is expected to close by the end of June. While the largest of it’s kind, this isn’t the first time Cresco Labs made a significant, all-stock acquisition. Last month, Cresco acquired Florida-based VidaCann for $120 million, a deal that would give the company access to around two-thirds of the U.S. legal cannabis market.
“From an Origin House perspective, this transaction is directly aligned with our strategy to build a leading portfolio of cannabis brands in California and to rapidly and accretively take those brands to the rest of the U.S. market, as well as the Canadian market. By partnering with one of the largest and most innovative U.S. multi-state operators in existence today, Origin House will supercharge its growth and be in a position to offer it’s brand partners access to 10 additional states, with licenses and supporting infrastructure already in place,” added Marc Lustig, CEO of Origin House. “Cresco shares Origin House’s resolute focus on the customer as the catalyst for all brand and business development efforts. This Transaction is not the first opportunity we have reviewed, but it has received the unanimous support of our board and large shareholders because we are confident that together we will be in a position to truly change the face of the global cannabis industry while continuing to create significant value for the shareholders of both companies.”
In response to the news, shares of Cresco Labs dipped around 2.7 percent, while shares of Origin House dropped around 6.8 percent. Overall, the cannabis sector is in the middle of an M&A storm with 81 deals have already taken place so far in 2019, compared to the 51 seen during the same period last year.