Merger Mania Making Waves in Cannabis Sector

Merger Mania Making Waves in Cannabis Sector

The cannabis market is rife with activity – big activity. Since the New Year, a number of massive mergers & acquisitions have taken place, stretching from East to West and North to South. These consolidations have drawn the eye of Wall Street as economies of scale and vertical integration tempt further capital flow into the sector.

Of course such deals create winners and losers, often at the expense of the little guy. Yet it also represents a maturation taking place in an industry that has long lingered in the shadows of adolescent economic potential.

As consolidation, normalization and scale continue to impact the industry, and US states decriminalize and legalize as well as federal banking and agency regulations pivot, the Cannabis Sector is bound to boom further.

With this in mind we thought it useful to provide a recap of some of the higher profile recent 2019 marriages that have taken place on the altar of alternative medicine.

 

Cura Leaf and Cura Cannabis (May 1, 2019)

Massachusetts-based Curaleaf, a vertically integrated cannabis company, agreed to acquire Portland, Oregon-based Cura Partners in an all-stock deal worth 1.27 billion Canadian dollars ($949 million).

This new entity will now have control over the two top cannabis brands on the East Coast and the West Coast, respectively.

Curaleaf will issue 95.6 million subordinated voting shares, giving Cura a roughly 16% stake in the company.

 

Read more here.

 

Canopy Growth + Acreage Holdings (April 19, 2019)

Canadian cannabis company Canopy is positioning itself to be a prime mover in the U.S. legal marijuana market, last week announcing an agreement to acquire Acreage Holdings in a deal valued at $3.4 billion.

The deal, the first between two cannabis companies on either side of the U.S.-Canada border, gives Canopy the right to acquire 100 percent of New York-based Acreage when marijuana is legalized on a federal level by the U.S. government. The agreement can be called off if that does not occur within 90 months of the cash payment, which would be sometime in 2027.

 

Read more here.

 

Cresco Labs + Origin House (April 01, 2019)

Cresco Labs announced what will be the largest acquisition of a public company operating in the American cannabis industry to date, agreeing to buy CannaRoyalty (dba Origin House) in an all-stock transaction valued at $825 million

Cresco Labs is a multi-state operator (MSO) based out of Chicago, and the acquisition will give them a strong position in California, where Origin House operates as a distributor, manufacturer, cultivator and branding company.

 

Read more here.

 

HEXO Corp + Newstrike Brands (March 17, 2019)

In the announcement of the acquisition of Newstrike Brands, the management of HEXO Corp. reported that the resulting company could make a net revenue of $400 million in 2020. With this figure in mind, the resulting business combination should be trading at 3.8x forward sales, which seems quite an opportunity.

Competitors in the cannabis industry are trading at as much as 69x Forward sales. HEXO has been massively undervalued by the market as few analysts seem to have assessed the new acquisition.

Read more here.

 

Harvest Health + Verano Holdings (March 13, 2019)

Harvest Health has signed a deal to acquire Verano Holdings for U$850 million in stock, in one of the biggest deals in United States cannabis history.

After the deal, Harvest Health will have operations in 16 states and will have licenses for 123 dispensaries. This is 50% more dispensaries than either MedMen or Green Thumb, making Harvest Health the largest cannabis company in the United States by dispensary license count.
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Read more here.

 

Tilray + Manitoba Harvest (February 20, 2019)

Tilray, Inc., a global leader in cannabis research, cultivation, production and distribution, will acquire Manitoba Harvest  from Compass Group Diversified Holdings, LLC.

Under the terms of the Agreement, Tilray will acquire Manitoba Harvest on a cash and debt-free basis, for an aggregate purchase price, including cash and class 2 Common Stock in the capital of Tilray, of up to C$419 million pending the achievement of certain milestones after the closing of the Transaction.

 

Read more here.

 

 

 

 

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