Harvest Health & Recreation, one of the top vertically integrated cannabis companies with a broad and deep U.S. footprint, announced an agreement for a brokered sale of up 500,000 convertible debentures for gross proceeds of $500 million.

Under the terms of the agreement, the deal will be closed through a series of five tranches of 100,000 debentures per tranche, over a maximum period of 18 months beginning with the close of the first tranche on May 1, 2019.

Founded in 2011, Harvest has grown to be the third largest cannabis cultivator in the U.S.  With more than 680 employees, Harvest’s business spans cultivation, manufacturing, technology, retail facilities, real estate, and brand building, and is led by a team of experts in finance, compliance, operations, and real estate.

“We realize our position as one of the leaders in the fast-growing U.S. cannabis market and this agreement continues our march towards creating unparalleled shareholder value and building the first truly national cannabis company,” said Jason Vedadi, executive chairman of Harvest.

Deal-Making History

The announcement of this private placement comes only weeks after Harvest announced that it had agreed to the largest U.S. cannabis consolidation in history: acquiring 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 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 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 times 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.

Upon completion of the deal, the resulting company will operate 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.”

The $500 million private placement will be used by Harvest for working capital and general corporate purposes, and will help position the company to broaden its horizons, from the goals focused on the U.S. market, to goals on a global scale.

“This transaction is fuel for growth to realize our vision of becoming one of the most valuable cannabis companies in the world,” said Steve White, CEO, Harvest. “With the recent announcement of our acquisition of Verano Holdings, not only will we have the largest and deepest footprint of licenses in the U.S., we are equally well capitalized to ensure our growth ambitions as a company.”

-Lynda Kiernan