Harvest Health & Recreation, Inc. (CSE: HARV, OTCQX: HRVSF) has entered into an agreement to buy VeranoHoldings, LLC in an all-stock deal valued at approximately USD $850 million based on a share price of C$8.79. Harvest Health stock jumped over 15% on the news to lately trade at C$9.56. The deal is expected to close in the first half of 2019 and comes with a $20 million termination fee.
If this deal is completed, the combined company will be one of the largest multi-state operators (MSO’s) in the U.S., as measured by licenses held and facilities permitted. Harvest will hold licenses that will allow it to operate up to 200 facilities in 16 states and territories across the country, including 123 retail dispensaries. Harvest Health was founded in 2011 and currently owns licenses for more than 140 facilities in the U.S. It is often ranked as the third largest cultivator.
“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.”
The newly combined company plans to continue hubs of operation in both Arizona and Illinois and merge key leadership talent. Both companies have recently attracted management expertise across consumer-packaged-goods, beverage, spirits, logistics, branding, horticulture, and extraction technologies from some of the largest most influential companies in the world, all supporting the companies’ explosive growth.
“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, Verano Co-founder, and CEO. “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.”
According to the company statement, Harvest’s planned acquisition of Verano will include:
· Licenses and operations in 11 states and territories, including seven cultivation licenses, 37 retail licenses and potential to reach 150+ million Americans;
· Vertically integrated, cash-flow positive operations;
· Proven executive team with retail, manufacturing, branding, logistics and operational experience and 300 employees. Hiring for approximately 300 new positions in 2019 with a focus on hiring minorities, women and veterans;
· Game changing ethanol extraction technology at pharmaceutical grade levels providing new market opportunities for cannabis biotech, food, and beverage verticals;
· Portfolio of premium proprietary brands with 150 + product SKUs sold in 150 + retail locations;
· Total cultivation expansion capacity of 900,000 sq. ft in Illinois, Nevada & Maryland;
· Ownership of an interest in nine Zen Leaf™ dispensaries with average annual revenues 2.5x higher than retail cannabis industry averages;
“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, Verano Co-founder and Chief Growth Officer. “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. Verano and Harvest independently have always focused on business fundamentals to drive year over year growth in both revenue and EBITDA. Together, we expect to accelerate that momentum and raise the bar even higher for the industry.”