Harvest Health & Recreation (Harvest Health), one of the largest vertically integrated cannabis companies in the U.S., announced it has acquired Verano Holdings, one of the largest privately-held multi-state, vertically integrated licensed operators of U.S. cannabis facilities, for approximately $850 million.
The deal, which is the largest U.S. cannabis consolidation in history, will result in a company that is one of the largest multi-state operations in the country as measured by licenses held and facilities permitted, totaling up to 200 facilities in 16 states, including 123 retail dispensaries.
The agreed-upon acquisition of Verano will include:
- Licenses and operations in 11 U.S. states and territories including seven cultivation licenses, and 37 retail licenses with the potential to reach 150 million more more American customers.
- Total cultivation expansion capacity of 900,000 square feet in Illinois, Nevada, and Maryland.
- Cutting-edge, pharmaceutical-level ethanol extraction technology with the potential for new market opportunities within cannabis-centered biotech, food, and beverage verticals.
- A portfolio containing more than 150 proprietary brands and product SKUs, sold in more than 150 retail locations.
- Ownership of a stake in nine Zen Leaf™ dispensaries with average annual revenues that are 2.5 time higher than industry averages, and
- An experienced executive team with manufacturing, branding, logistics, retail, and operational backgrounds, 300 current employees, and plans to hire another 300 in 2019.
“The combination with Verano fits perfectly with our vision of creating the world’s most valuable cannabis company,” said Jason Vedadi, executive chairman of Harvest. “We are confident that this is an opportunity to continue to leverage each of our company’s strengths and drive continued shareholder value, while at the same time achieving the scale we know will give us a leadership position in one of the largest cannabis markets in the world.”
Once the deal is complete, the resulting company will be operating eight cultivation facilities, seven manufacturing facilities, and 30 dispensaries, with expectations that by the end of 2019 the company will have expanded to 13 cultivation sites, 13 operating manufacturing facilities, and more than 70 dispensaries, with continued growth into 2020.
“This is a natural match between like-minded entrepreneurs who have built our companies from the initial facilities into two of the largest MSOs in the U.S., with an unwavering focus on operational excellence, superior quality products and service, and delivering value to customers and shareholders,” said George Archos, co-founder and CEO, Verano Holdings. “Our growth and unique positioning in key markets allowed us to evaluate some of the largest players in the space, but we only had one unanimous choice for a major transaction and that was Harvest.”
Future plans for the company include operational hubs in Arizona and Illinois, and the creation of a combined leadership team consisting of leaders with a range of expertise in horticulture, extraction technology, CPGs, beverages, spirits, logistics, and branding.
“Verano has been creating a brighter way for cannabis production, products and health and wellness by assembling a stellar team of experts drawn from the cannabis industry and the top echelons of Fortune 500 corporations,” noted Sam Dorf, co-founder and chief growth officer, Verano. “We are excited to join forces with Harvest to leverage each of our strengths to share the benefits of cannabis in innovative new ways with an ever-increasing customer base.”
A Serious Asset Class
The legal medical and recreational cannabis, and parallel hemp asset class has rapidly gained legitimacy, and with it, capital.
In July of last year New York-based, multi-state cannabis company Acreage Holdings announced it raised $119 million through a Series E round of funding. This raising represented the largest private round in the history of the U.S. cannabis industry, surpassing the $100 million raised by Privateer Holdings only months before in January of the same year.
The following month, Global alcohol giant, Constellation Brands, the $42 billion name behind Corona and Modelo beers, made a game-changing announcement, stating that it is investing a further $4 billion in publicly traded Canadian marijuana grower Canopy Growth.
Within months, in December 2018, Altria Group, the name behind Marlboro and Virginia Slim cigarettes, made a bold move into the legal cannabis sector, making a US$1.8 billion investment in Canadian cannabis company Cronos Group in exchange for a 45 percent minority stake in the company.
And although the largest deals to-date have occurred in Canada where there exists federal legalization of the industry, the recent U.S. federal legalization of industrial hemp production through the 2018 Farm Bill indicates a future open to U.S. deals of equal scale.
-Lynda Kiernan