Marijuana retailer Curaleaf is snapping up Cura Partners for $949 million in the largest US marijuana merger to date as a wave of consolidation sweeps the industry
- Curaleaf announced on Monday it is acquiring Cura Partners, which operates the popular Select brand, in an all-stock transaction valued at $949 million.
- It's the largest US marijuana transaction to date.
- Curaleaf CEO Joe Lusardi told Business Insider in an interview that he expects the consolidation trend to continue in the cannabis industry.
The US marijuana industry is in an unprecedented consolidation wave, and it's showing no signs of slowing down.
On Tuesday, marijuana retailer Curaleaf announced it is acquiring the privately held Cura Partners in an all-stock transaction valued at $948.8 million. While the deal still has to be approved by regulators, it's so far the biggest US to US marijuana merger, eclipsing Harvest Health and Recreation's $850 million acquisition of Verano Holdings and Cresco Labs $825 million purchase of Origin House in March and April respectively.
"We felt that it would be an incredibly complimentary transaction given that we could put the East Coast [Curaleaf is based in Massachusetts] and West Coast together," said Curaleaf CEO Joe Lusardi in an interview with Business Insider. "We're really excited to be able to pull this off."
Lusardi said that Select, Cura Partner's retail brand, is one of the "most recognized" cannabis and CBD oil brands in the Western US.
The deal, in other words, boils down to a close to $1 billion bet on the power of consumer brands to shape the future of the cannabis industry.
Once approved the deal could include up to $200 million in earn-outs if Curaleaf hits certain revenue targets for its wholesale business and the Select brand by 2020. Cura shareholders will end up owning around 16% of the combined company when the deal goes through, the company said. Cura's CEO, Cameron Forni, will stay on as President of Select and will join the combined company's board. Jason White, a former Beats by Dre exec and chief marketing officer of Select, will stay on as the CMO of Curaleaf.
Eight Capital and GMP Securities acted as financial advisors to Curaleaf on the deal, and Canaccord Genuity and Bayline Capital Partners advised Cura. On the legal front, Loeb & Loeb LLP and Stikeman Elliott LLP acted as advisors to Curaleaf, and Dentons US LLP and Goodmans LLP acted on behalf of Cura.
While Curaleaf's deal represents the biggest US marijuana transaction to date, it's a far cry from Canadian marijuana giant Canopy Growth's $3.4 billion acquisition of Acreage Holdings.
But there is a key difference: Curaleaf and Select, when combined, brought in $205 million in revenue last year on a combined $5.85 billion dollar market cap, according to a deck reviewed by Business Insider. That's compared to Canopy Growth's monstrous $51 billion dollar market cap, though Canopy reported only around $61 million of revenue in its most recent quarterly earnings report.
From a minority investment to a full-on acquisition
Lusardi said the deal had been in the works for the past year-and-a-half, since Curaleaf's chairman, Boris Jordan - formerly the founder of the investment bank Renaissance Capital - made a minority investment in Cura.
"So we became familiar with the company and their management team and really admired them from a distance and saw how fast they're building their business as we were building ours," said Lusardi.
While Lusardi said that Curaleaf will remain "very inquisitive" about M&A opportunities, he said the company's focus will remain on executing in the US rather than looking abroad to cannabis markets in Europe and South America. Curaleaf went public on the Canadian Securities Exchange last year.
"We're on the M&A trail constantly and you can expect us to be very active in that space," said Lusardi. "So we're having conversations all over the country."
In terms of the wider US cannabis industry, Lusardi says he doesn't see the consolidation trend slowing down anytime soon.
"These are complex businesses, right? So companies that can operate across multiple jurisdictions and achieve synergies will be the most well suited to be part of the future of the industry," said Lusardi.
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