Harvest Health & Recreation Inc. (CSE: HARV, OTCQX:HRVSF) and Verano Holdings, LLC have announced the mutual termination of the Business Combination Agreement dated April 22, 2019. At the time this was announced, Harvest Health had agreed to buy Verano in an all-stock deal valued at approximately $850 million based on a share price of C$8.79. The stock was lately trading at C$1.62 or $1.13.
“Given the persistent challenges in consummating this deal and current market conditions both companies felt it was prudent to move forward separately at this time,” said Steve White, Harvest CEO. “We have tremendous respect for the entire team and operations at Verano Holdings. We wish them well and look forward to possibly working together in the future.”
The companies stated that prolonged obstacles in meeting requirements for state and local regulatory authorities needed to transfer ownership and operational licenses, adverse capital market conditions, a challenging environment for asset sales, all contributed significantly to the decision not to move forward with the pending acquisition. No breakup fees or other considerations are owned by either party as a result of the termination of the BCA.
Mr. White continued, “We remain focused on the continued development of assets in our core markets including Arizona, Florida, Maryland, and Pennsylvania. Recent capital raising efforts have afforded the company sufficient resources to continue to invest in strategic projects while moving toward profitability.”
“This decision was not taken lightly,” said George Archos, Verano Holdings CEO. “While both organizations worked very hard to consummate this transaction, significant delays in closing started with the Hart-Scott-Rodino antitrust review process. Those were followed by state and local regulatory complexities in multiple states. Now with the COVID-19 pandemic often being dealt with in the very agencies that must approve the transaction, it has become clear that this combination would not be completed within the established timeframe. We look forward to continuing to grow our operations as one of the largest privately held multi-state operators in the U.S.”
Harvest’s Numerous Flings
Harvest Health had started 2020 with breakup news from Falcon International. In January Harvest filed suit against Falcon International, Inc. asking to terminate the planned merger agreement and return the money Harvest paid to Falcon under the Merger Agreement. That lawsuit alleged that Falcon’s principals stalled due to the falling share price of Harvest. Harvest went on to suggest that Falcon International engaged in illegal activities.
Falcon has said that Harvest owes the company $50 million in a breakup fee. In addition to that Falcon said, “Amounts previously funded by Harvest to Falcon are convertible into Falcon equity at Harvest’s or Falcon’s option and, accordingly, are unlikely to be paid.”
Just a few weeks ago Harvest announced that it would acquire Interurban Capital Group for approximately $85.8 million payable by the issuance of 309,452 multiple voting shares, assumption of approximately $19.1 million of debt convertible into 205,594 multiple voting shares and payment of an additional $9.3 million upon exercise of a call option agreement to acquire controlling interests in five Washington cannabis dispensaries or alternatively $12.4 million to acquire substantially all of the assets of these dispensaries. ICG’s assets include direct and indirect licenses and rights to acquire entities with licenses in California, Iowa, and Washington. In addition, ICG is a service provider to these entities.
Verano is a private company that is known to have licenses and operations in 11 states and territories, including seven cultivation licenses, 37 retail licenses and the potential to reach 150+ million Americans. The company is vertically integrated with cash-flow positive operations.