Grassroots Archives - Green Market Report

Debra BorchardtDebra BorchardtJuly 17, 2019
Grassroots-1280x688.jpg

5min4720

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.”

 

 


Debra BorchardtDebra BorchardtOctober 31, 2018
Grassroots-1280x688.jpg

4min60320

As the landscape for multi-state operators gets more and more crowded, it’s becoming difficult to differentiate between them all. Grassroots Cannabis is the latest to toss its hat into the ring. It was founded by Mitch Kahn in Illinois and the company currently holds 27 licenses with operations in six states.

Grassroots’ operations are in Illinois, Maryland, Nevada, Ohio, Pennsylvania, and North Dakota. Michigan is in the pipeline to become the seventh state. The company says it is the only vertically integrated operator in Illinois, Pennsylvania, and Ohio.

To date, Grassroots has raised $70 million and the company said its plan is to roll all of the state entities into a holding structure. Then it will embark on another full company raise.

“We focus on the legal limited license states where we can create a real scale in those states, ” said Kahn. The company is one of only two growers licenses awarded in North Dakota, which has adult marijuana legislation on the mid-term ballot for November 6.

The company said that it has in-progress deals in Arizona, Florida, Maryland, New Jersey, Nevada, Ohio, Pennsylvania, and Vermont. It is also seeking to make acquisitions in these states and Massachusetts.

“We began as a retail company, not as a cultivation company,” said Kahn. “We come at it from a different approach.”Kahn’s background is retail which explains the significant retail focus. “The product mix and strains are designed to address what the patients want,” he added.

Grassroots is the flagship flower line, while Take five is the line of pre-rolls available in the Grassroots strains. Torch is the vape pen line and the company also makes a high-end terpene blend available as a concentrate or vape. Beverages and edibles are in the development stage at this time, along with pharmaceutical products.

Last week, Colorado-based edible gummy company Wana Brands said it finalized an exclusive licensing agreement with Grassroots Cannabis to bring its products to Illinois. “Grassroots Cannabis is hands-down the most trusted provider of medical cannabis in Illinois. Its loyal patient base and a strong focus on compliance are why Wana Brands sought it out as a partner,” said Nancy Whiteman, Founder & CEO of Wana Brands. The licensing agreement has been approved by the Illinois Department of Public Health (IDPH).

As of June 30, the IIDPH has approved approximately 40,000 qualifying patients since the Medical Cannabis Registry Program began accepting applicants in September 2014. Grassroots has eight dispensaries across the state of Illinois.

Grassroots has focused on building its identity as a center for wellness. Kahn said that he envisions dispensaries offering yoga and pilates. “We want to treat the whole patient,” he said.

 

 

 



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