US Marijuana Firms Merge in $850 Million Deal

March 11, 2019 by Paul Ausick

In what may be the largest U.S. transaction yet in the legal marijuana sector, Harvest Health & Recreation has entered a binding agreement to acquire Verano Holdings in an all-stock transaction valued at $850 million. The deal’s value is based on a Harvest share price of C$8.79 ($6.55). Harvest trades on the Canadian Stock Exchange and over the counter in the United States.

Harvest is a vertically integrated cannabis company whose operations including cultivation, manufacturing, and retail facilities with licenses in nine U.S. states. Verano is also vertically integrated and operates in seven states. Once the transaction receives regulatory approval and is completed, Harvest will hold operating licenses for up to 200 facilities in 16 states and territories across the country, including 123 retail dispensaries.

Harvest’s executive chair, Jason Vedadi, said:

The combination with Verano fits perfectly with our vision of creating the world’s most valuable cannabis company. 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.

When the acquisition closes, Verano shareholders will receive a combination of Harvest subordinate voting shares and Harvest multiple voting shares as mutually agreed between the parties. The acquisition is expected to close in the first half of 2019.

A definitive agreement must be completed within the next 30 days or each company faces a $20 million break-up fee. Verano’s existing total of approximately $3.2 million “will remain in place following completion of the transaction.” Harvest, which is based in Phoenix, will not be subject to a change of control as a result of the transaction, and the combined company will maintain its office at Verano’s Chicago base.

The largest prior transaction between two U.S. cannabis companies was MedMen’s $682 million acquisition of PharmaCann last October. The multibillion-dollar deals between Constellation Brands and Canopy Growth ($4.0 billion) and between Altria and Juul ($12.8 billion) were investments, not acquisitions or mergers.

Harvest stock had added about 10.5% on the Canadian Stock Exchange by the noon hour Monday to trade at C$9.48 ($7.07).