Grassroots Archives - Green Market Report

Curaleaf Holdings, Inc. (OTCQX: CURLF) closed on its previously announced acquisition of GR Companies, Inc. also known as Grassroots on July 23, 2020. Curaleaf stock was higher by almost 3% to $7.39 on the news as it has been almost a year since it was first announced. The stock is nearing its year high of $8.21.

The acquisition of Grassroots now propels Curaleaf to the top of the charts for cannabis companies by revenue. The company will now have affiliated operations that cover over 135 dispensary licenses, 88 operational dispensary locations, over 30 processing facilities, and 22 cultivation sites with 1.6 million square feet of current cultivation capacity. It also jumpstarts the company’s presence in the hot states of Illinois and Pennsylvania.

“The successful acquisition of Grassroots marks Curaleaf’s expansion into new vertically integrated markets in the Midwest, firmly establishing our U.S. market leadership position. This highly complementary combination brings together two companies with a shared vision for enhancing patients’ and customers’ lives with high-quality cannabis wellness and lifestyle products,” said Joseph Lusardi, CEO of Curaleaf. “The integration of Grassroots is expected to be immediately accretive to our financial performance, with our unprecedented scale providing significant opportunities to leverage Curaleaf’s powerful consumer brands as well as new form factor innovations across our expanded national presence.”

The company said in a statement that the cultivation and processing assets in Illinois have been transferred and the formal approval to transfer certain retail assets is expected imminently. Plus, Maryland operations previously affiliated with Grassroots may be transferred to Curaleaf after expiration of the statutory hold period, subject to regulatory approval and compliance with restrictions on ownership or control of multiple cultivations, processor, and dispensary licenses in the State.

Completion of the transaction accelerates Curaleaf’s expansion into Illinois and Pennsylvania, which are among the largest and fastest-growing cannabis markets in the United States. Curaleaf will now hold a leading licensed cannabis presence in-state markets including Arizona, Connecticut, Florida, Illinois, Pennsylvania, Maryland, Massachusetts, Maine, Nevada, New Jersey, New York, North Dakota, and Vermont.

“This opportunity would not have come to fruition without the strength of our highly skilled executive team, who have built an impressive portfolio at an unprecedented pace, with facilities in highly competitive markets,” said Mitchell Kahn, Co-Founder, and CEO of Grassroots. “We look forward to integrating our talent and resources to build a great consumer product company – one that is dedicated to producing and delivering high-quality, safe, and effective cannabis products to the customer.”

Curaleaf Announces New Board Member

Curaleaf also announced it appointed Kahn to the company’s Board of Directors effective immediately. The appointment of Mr. Kahn expands the Curaleaf Board of Directors from five to six members.

“On behalf of the Curaleaf Board of Directors and management team, we are pleased to welcome Mitch to the Board. As a co-founder of Grassroots, he brings an impressive track record for success in building the largest private, vertically integrated U.S. multi-state cannabis operator. Combined with his deep experience across commercial real estate as well as the legal field, Mitch adds significant expertise and insight that will be vital as we extend our market leadership position and drive long-term shareholder value,” said Boris Jordan, Executive Chairman of Curaleaf.

Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF)closed on a C$34 million offering that was announced on July 2, 2020. The company said proceeds of the offering will be used to fund Grassroots’ high-return expansion projects, replenish its working capital as well as for general corporate purposes.

Joseph Lusardi, CEO of Curaleaf, said, “Our successful completion of this private placement further strengthens Curaleaf’s balance sheet and provides additional flexibility to support our future expansion initiatives as we look to extend our leadership position in the fast-growing U.S. cannabis market.”

Deal Terms

The company said in a statement that under the initial tranche, subscribers purchased an aggregate of 3,541,429 subordinate voting shares of the Company at a price of C$7.70 per Subordinate Voting Share for aggregate gross proceeds of approximately C$27,269,003.  Subsequent to setting the initial tranche, the Company secured a second tranche investment, which is part of the Offering closing today.  Under the second tranche, a subscriber purchased 842,269 Subordinate Voting Shares at a price of C$8.058 per Subordinate Voting Share for gross proceeds of approximately C$6,787,003.

In aggregate, the Offering generates approximately C$34,056,007 in gross proceeds for the Company in exchange for 4,383,698 Subordinate Voting Shares at an average price of approximately C$7.77 per Subordinate Voting Share.

Grassroots Acquisition

Curaleaf had announced in July 2019 that it was buying Grassroots or GR Companies Inc. in a deal valued at $875 million. The deal was to be made up of 108.8 million shares and $75 million at the closing which was expected in early 2020. “With the acquisition of Grassroots and the pending acquisition of Select, Curaleaf is the world’s largest cannabis company by both revenue and operating presence,” said Joseph Lusardi, CEO of Curaleaf. “With a combined 68 open dispensaries, this transaction significantly accelerates our expansion strategy and strengthens our reach across the medical and adult-use markets. In addition, it enhances the depth of our retail and wholesale platform across the country. By leveraging our scale, as well as our market-leading capabilities and expertise, we will continue to deliver value for our shareholders.”

The company currently operates in 18 states with 57 dispensaries, 15 cultivation sites, and 24 processing sites. Curaleaf employs over 2,200 people across the United States.

Curaleaf Holdings Inc. (NURLF) stock popped almost 20% on the news it was acquiring privately-held multi-state operator Grassroots or GR Companies Inc. in a deal valued at $875 million. The deal will be made up of 108.8 million shares and $75 million at the closing which is expected in early 2020.

If the deal is completed, Curaleaf’s footprint grows from 12 states to 19 states and putting it within reach of Acreage Holding’s (ACRG.U) size. The company currently has 48 operating dispensaries, which would increase to 68 and the number of dispensary licenses would move from 70 to 131. The deal would also boost the company’s presence in the Midwest, where Grassroots is strong with 20 locations in Illinois and Pennsylvania.

“With the acquisition of Grassroots and the pending acquisition of Select, Curaleaf is the world’s largest cannabis company by both revenue and operating presence,” said Joseph Lusardi, CEO of Curaleaf. “With a combined 68 open dispensaries, this transaction significantly accelerates our expansion strategy and strengthens our reach across the medical and adult-use markets. In addition, it enhances the depth of our retail and wholesale platform across the country. By leveraging our scale, as well as our market-leading capabilities and expertise, we will continue to deliver value for our shareholders.”

Compass Point analyst Rommel Dionisio wrote, “Assuming the successful closing of this transaction as well as the recently announced agreement to acquire Select, Curaleaf would not only become the largest company in the U.S. cannabis industry, but also the largest player in the world by pro forma revenue.” His target price is $13 and the stock was lately trading at $7.74.

Select Aquisition

In May, Curaleaf said it was going to acquire Cura Partners, Inc. the owners of the Oregon-based Select brand, in an all-stock deal valued at C$1.27 billion or $948.8 million. The company said that the acquisition included Select’s manufacturing, processing, distribution, marketing, and retailing operations and all adult-use cannabis products marketed under the Select brand name, including all intellectual property. Select ‘s THC products are sold in more than 900 retailers, it is the leading cannabis brand in key Western states, including California, Arizona, Oregon, and Nevada. The combination of the two companies will provide immediate geographic diversification with Curaleaf’s footprint on the East Coast and Select’s brand strength on the West Coast.

Midwest

Dionisio also noted that the two states where Grassroots has planted its flag, Pennsylvania and Illinois are two key growth markets. “We believe Illinois represents the most important growth opportunity in the U.S. cannabis market in 2020, as that state, the fifth most populous in the country, opens up to recreational use on Jan. 1,” he wrote. He also pointed out that Pennsylvania is one of the fastest-growing with over 100,000 medical patients signed up since Feb. 2018. He increased his estimates for 2020 revenue from $696 million to $861 million and EBITDA from $180 million to $248 million. The EPS estimate was moved to $0.21 from $0.20.

Mitch Kahn, co-founder and CEO of Grassroots, said, “Today’s announcement is a testament to the hard work of the many employees that helped make Grassroots the leading cannabis company in the Midwest. This acquisition will enable us to give our patients and retail partners greater access to products that adhere to the highest standards of quality and reliability, and our employees the opportunity to be part of a best-in-class operator.”

Evan Eneman, CEO of MGO|ELLO Alliance, a cannabis finance, taxation, investment banking advisory and firm said, “This trend in M&A is an evolution in the cannabis industry, and as investors put serious capital into these deals, everyone is looking for guidance on who will be next.”