Harvest Health & Recreation’s $850 million purchase of Verano Holdings is the largest U.S. deal of its kind and the company is a step closer on its way to becoming the “largest cannabis company in the world.”
The deal surpasses the previous record for a U.S. acquisition in the cannabis industry – MedMen’s $682 million purchase of PharmaCann last year. The deal with Verano gives Arizona-based Harvest the right to operate up to 200 facilities – including 123 retail dispensaries – across 16 states, with the the potential to reach more than 150 million Americans, said the company in a statement to the Canadian Securities Exchange (CSE).
Harvest CEO Steve White said during an investor conference call: “The acquisition is the next step in Harvest becoming the largest cannabis company in the world.” In a subsequent interview with CNBC, he elaborated: “Presently, we’re in a phase that people are referring to it as a land grab. We plan on … developing the largest retail footprint, the largest retail platform, in the United States, and with this acquisition, I think we’ve done that.”
Harvest currently operates in Arizona, California, Florida, Maryland, Ohio and Pennsylvania, and was already planning to open new locations in Massachusetts, Michigan and North Dakota. The Verano acquisition adds Illinois and Nevada to that list, as well as plans for new locations in Puerto Rico, Oklahoma and New Jersey.
White told CNBC he had been attracted to Verano’s focus on the bottom line: “We have had an emphasis on profitability from the very beginning of our formation, and when we started talking to Verano, we got the sense, the very clear sense, that they are like-minded in that respect. “They have been running a profitable company for quite some time as well, which, as you know, in the U.S. cannabis industry is quite unique.”
Harvest, which trades on the Canadian Securities Exchange (HARV), is on track to make further acquisitions in 2019, said White in his CNBC interview. Last month it announced the purchase of California-based Falcon International Corp, expanding its footprint by 16 cannabis licenses.
Harvest’s CSE market announcement says it will have 13 cultivation facilities and 13 manufacturing facilities operating by the end of 2019. It currently has a product portfolio of more than 150 brands and the Verano deal will deliver new technology, allowing it to expand into the biotech and food and beverage industries, says Harvest representative. Chicago-based Verano was launched last October following the consolidation of four companies: Ataraxia, Zen Leaf, Verano, and 3 Boys Farms.
The U.S. cannabis industry is currently undergoing a wave of consolidation. Given the heightened competition for licenses in states that have recently legalized cannabis, acquisitions allow larger companies faster and cheaper routes into in new markets. Harvest has a market value of around $1.5 billion, making it the third-largest U.S. cannabis firm, after Green Thumb Industries and Curaleaf Holdings.
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