Harvest Health & Recreation, Inc. (CSE: HARV, OTCQX: HRVSF) is acquiring CannaPharmacy, Inc. in a deal with undisclosed value. CannaPharmacy owns or operates cannabis licenses in Pennsylvania, Delaware, New Jersey, and Maryland.
Harvest recently announced the private placement of $500 million in convertible debentures to continue to finance acquisitions and corporate growth. Harvest said that it expects that the transaction will be accretive to Harvest’s 2020 revenue and EBITDA.
“We’re seeing significant M&A activity across our industry, but the most important factors are the price one pays for an acquisition, strength of the assets relative to the market size and synergies between the companies,” said Steve White, CEO of Harvest. “Harvest was already fully funded to build out our entire footprint, inclusive of the significant assets that come with the Verano acquisition. Our recent $500 million financing, secured in $100 million tranches for new accretive acquisitions like CannaPharmacy, continues to solidify Harvest’s position as the leading company in the cannabis industry in reach, brands, infrastructure, assets, and footprint.”
Expanding Its Footprint
The CannaPharmacy acquisition will bring operations in four major northeastern states. The licenses and assets of CannaPharmacy will add to Harvest’s extensive national footprint across 17 states and Puerto Rico. Upon closing of this transaction and the closing of the previously announced acquisition of Verano Holdings, Harvest will hold licenses that allow it to operate up to 213 facilities, including 130 retail dispensaries.
“All of our efforts back up our three core objectives; to expand and deepen our retail and wholesale footprint, build national brands and continue our path to profitable growth, and this CannaPharmacy deal is no different,” said Jason Vedadi, Executive Chairman of Harvest. “Harvest has led the cannabis market in the Western United States for years, and this acquisition will similarly widen and extend our U.S. foothold to the East Coast. When you add that to our existing dominant position in the Pennsylvania and Maryland markets, acquisition of CBx and its suite of brands, as well as our pending acquisitions of Falcon and Verano, with its holdings throughout the eastern seaboard and brands and infrastructure to leverage, we are looking at Harvest becoming a household name throughout the region in a matter of months.”
The company statement outlined the acquisition as follows:
- One of six operational (and 12 awarded) fully vertical licenses, permitting cultivation, retail sales and manufacturing.
- Woodbridge, NJ flagship store open and operational on a major highway since 2013, one of six in the state, 20 miles from NYC. According to the most recent NJ Dept. of Health annual report in April 2018, this dispensary has served more patients and completed more cannabis transactions since inception than any other dispensary.
- A satellite store is approved and under construction in Union, NJ, 17 miles from NYC, on one of the most heavily trafficked highway corridors in the state at the intersection of the Garden State Parkway, NJ Turnpike, Route 22, and Route 78.
- Approval pending for a third dispensary in densely populated Monmouth County, NJ (the “Jersey Shore”), which presently does not have a single dispensary.
- 43.4% year-over-year revenue growth from 2017 to 2018.
- New Jersey has 42,000 medical patients and growing 60 percent annually.
- One 46,800 square foot cultivation and processing facility in the fifth most populous state in the country, with a statutory cap of 25 grower-processors;
- Facility is a former Pepsi bottling plant employing local Pennsylvanians.
- Harvest currently has seven state licenses allowing up to 21 retail stores throughout the state.
- Pennsylvania currently has 116,000 medical patients as of February 2019 and growing at 10 percent month over month.
- Rights to one dispensary in Prince George’s County.
- One of three fully vertical licenses, permitting cultivation, manufacturing, and three retail dispensaries.
- Newark, DE flagship open and operational on a major highway leading into the heart of downtown, one of four stores statewide, in the county that hosts 60 percent of the state’s population.
- Two additional dispensaries expected to open in 2019-2020.
- Delaware currently has 7,104 medical patients, a 53 percent increase from 2017, and is experiencing rapid growth in a state with one of the most liberal lists of qualifying conditions in the country.
Harvest recently won every license it applied for in Pennsylvania, giving the company the ability to open up to 21, the largest retail network in the state. Harvest received the highest scores on all but one of its regional applications (where it placed 2nd overall) based on its responses to the criteria developed by the Pennsylvania Department of Health.