Today was a big day for the cannabis industry as another major consolidation is underway. While there have been a number of multi-billion-dollar merger deals in the marijuana space, Wednesday saw one of the largest deals in recent months take place that, in its aftermath, will form the world’s largest cannabis seller with a presence in almost 20 states.
Curaleaf Holdings (CNSX: CURA), a Canadian-listed but American operated cannabis retailer with a $3.4 billion market cap, announced today that they were buying out GR Companies (Grassroots), which is the largest private vertically-integrated multi-state operator (MSO) in the market right now in a deal worth $875 million.
The cannabis chain, which is based in the Midwest, operates 20 dispensaries under the Grassroots brand and has requisite licenses for 41 more locations.
Considered to be a natural expansion for Curaleaf as the two companies are highly synergistic, the deal would expand Curaleaf’s presence from 12 to 19 states. The combined company’s asset portfolio would include 131 dispensary licensees, 68 operational locations, 20 production sites, and 26 processing facilities.
“With the acquisition of Grassroots and the pending acquisition of Select, Curaleaf is the world’s largest cannabis company by both revenue and operating presence,” said Joseph Lusardi, CEO of Curaleaf. “With a combined 68 open dispensaries, this transaction significantly accelerates our expansion strategy and strengthens our reach across the medical and adult-use markets. In addition, it enhances the depth of our retail and wholesale platform across the country. By leveraging our scale, as well as our market leading capabilities and expertise, we will continue to deliver value for our shareholders.”
While most mergers result in some redundancies, with overlapping assets that would have to be sold off or dealt with some other way, the Curaleaf-Grassroots deal has virtually no overlap, which is one of the reasons why analysts are so excited about the deal.
Just back in May, Curaleaf announced that it would be acquiring the distributor of the popular “Select” cannabis brand for another $950 million in stock. Altogether, this series of major deals puts Curaleaf well on the path of outshining many other Canadian cannabis producers, with this Grassroots deal pushing them to become the largest retailer seller of weed globally.
Interestingly enough, Curaleaf’s valuations still are trading at a sharp discount in comparison to Canadian marijuana producers, who have been able to list on the NYSE and the NASDAQ since they operate in areas where marijuana is fully legal.
Since Curaleaf and other MSOs that sell in the U.S. are still violating federal law, they have to instead resort to Canadian listings, giving them a somewhat smaller pool of potential investors who could buy and trade the company’s shares.
Shares of Curaleaf spike over 17.2 percent in response to the news, a justified surge considering how big of a deal the news announcement is. Over the past six months, the company’s stock has gone up and down drastically, following something of a head-and-shoulders pattern as shares almost doubled from below C$8 to around C$15 in May, before settling back down to its current price at C$9.95.
