American cannabis operator Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) (FSE: 6CQ) is looking to secure the industry’s top spot with the acquisition of Columbia Care Inc. (NEO: CCHW) (CSE: CCHW) (OTCQX: CCHWF).
On Wednesday, Cresco said the all-stock deal represents a total enterprise value of US$2 billion, and is expected to close in the fourth quarter this year.
Under the terms, Columbia shareholders will receive 0.56 of a subordinate voting share in Cresco. After the transaction takes effect, Columbia shareholders will hold around 35 per cent of the other firm’s shares.
According to a statement, the acquisition has been approved by both boards of directors, as well as Columbia shareholders holding around 25 per of the voting power — two-thirds of them are required to approve the deal. Shareholders of that firm will vote on the transaction at a special meeting planned for the second quarter.
Approval from Cresco shareholders isn’t required.
If the acquisition goes through, the company says it will be the largest multistate operator with more than US$1.4 billion in annual revenue. The combined entity would have over 130 stores, representing the number-two retail footprint in the industry, and the number-one outside Florida.
In its earnings results released Wednesday, Cresco said it made US$822 in revenue in fiscal 2021. Earlier this month, Columbia forecasted annual revenue of US$460 million in its preliminary results. That’s nearly US$1.3 billion combined.
Read more: Cresco Labs closes US$80M acquisition of Pennsylvania operator
Read more: Curaleaf posts record US$1.2B in sales for fiscal 2021
Currently, Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF) sits in the top spot, after reporting record fiscal 2021 revenue of US$1.2 billion earlier this month. The firm says it has 128 dispensaries across 28 states.
Cresco CEO Charles Bachtell says the combination is highly complementary, providing depth, diversification and long-term growth.
“On a pro-forma basis, the combined company will be the largest cannabis company by revenue, the number one wholesaler of branded cannabis products, and the largest nationwide retail footprint outside of Florida,” he explains in a statement.
In an evolving industry, Columbia CEO Nicholas Vita says his company’s mission to deliver the best outcome for its shareholders is better achieved through consolidation.
“With Columbia Care’s strategic national footprint in the most attractive markets and Cresco Labs’ success in execution and incredibly popular brands, we will together create the most important — and the most investable — company in cannabis.”
nick@mugglehead.com
