- Loading (Have a toke while you wait)...
This past week, Cresco Labs announced what will be the largest acquisition of a public company operating in the American cannabis industry to date, agreeing to buy CannaRoyalty (dba Origin House) in an all-stock transaction valued at $825 million. Cresco Labs is a multi-state operator (MSO) based out of Chicago, and the acquisition will give them a strong position in California, where Origin House operates as a distributor, manufacturer, cultivator and branding company. Investors embraced the deal, sending the stock of Cresco Labs, which began trading in December, to an all-time high as it closed 10% higher on the week.
The Cresco Labs acquisition followed another big move four weeks ago, as Arizona-based Harvest Health & Recreation announced the $850 million pending acquisition of privately-held Verano Holdings, a Chicago-based MSO. Like the reaction to the Cresco deal, Harvest stock soared following the announcement. It’s not just the American cannabis sector seeing consolidation, as HEXO Corp recently announced the all-stock pending acquisition of Newstrike Brands. In this case as well, investors liked the deal, sending HEXO to a new all-time high.
M&A is nothing new to the cannabis sector, as we have seen substantial consolidation to date in Canada. The first merger among publicly-traded licensed producers (LPs) was the Canopy Growth acquisition of Bedrocan Cannabis in late 2015, when the company was known as Tweed Marijuana. Canopy Growth followed that acquisition in early 2017, buying Mettrum, and it added Hiku Brands in 2018. Aurora Cannabis closed on the acquisitions of both CanniMed Therapeutics and MedReleaf last year, two very large transactions, as these companies were both among the leading LPs in terms of revenue generation in Canada. More recently, Aleafia Health closed on the acquisition of Emblem. Tilray didn’t buy the whole company, but it did recently announce the acquisition of Manitoba Harvest, a leading hemp food company that was held by publicly-traded Compass Diversified. This followed its purchase of a privately-held LP in Ontario.