Curaleaf deal boosts bid for front-runner status in U.S. pot market

U.S. cannabis company Curaleaf Holdings Inc. bolstered its bid to become the leading U.S. player on Wednesday with the US$825-million acquisition of the privately held GR Companies Inc.

Prior to agreeing to acquire GR, which is also known as Grassroots, Curaleaf held 70 dispensary licences but will now see that number close to double. The combined entity will also have 20 operational locations and 18 cultivation sites.

Shares of Wakefield, Mass.based Curaleaf, which trade on the CSE, jumped on news of the deal, surging more than 17 per cent Wednesday to close at $9.95.

The move comes only two months after Curaleaf bought Cura Partners Inc., known for its cannabis oil, Select, for US$948.8 million.

“This marks the second transformative deal for Curaleaf in 2019 and in our opinion is the most meaningful in the cannabis industry this year,” Curaleaf chairman Boris Jordan said in a conference call.

“With our acquisitions of Grassroots and Select, Curaleaf will move into a class of its own.”

During the conference call, Jordan and Curaleaf CEO Joseph Lusardi stressed that the deal would give them exposure to 19 states, up from the current 12. Illinois and Pennsylvania are two of Grassroots’s strongest markets and Curaleaf had no exposure to either.

Illinois, which legalized cannabis for adult use earlier this year, is of particular interest to the company. The market, some believe, could even eventually challenge Colorado’s in terms of size. Pennsylvania could also be a key target due to the fact that it’s the sixth most populated state in the U.S.

The cannabis space has seen its share of criticism because companies such as Canada’s Canopy Growth Corp. have been involved in dozens of acquisitions and are still not profitable.

According to GMP Securities analyst Robert Fagan, Curaleaf has taken a more strategic approach.

The deal comes with few integration problems due to the complementary nature of the assets, Fagan said.

Beacon Securities Limited analyst Russell Stanley said the deal is a prime example of Curaleaf attempting to solidify itself as the front-runner in the U.S. cannabis space.