Major marijuana merger
Trulieve, the largest marijuana company in Florida, plans to buy Harvest, the largest marijuana company in Arizona, in a $2.1 billion deal that could create the biggest cannabis company in the U.S. if the deal is approved, the companies announced Monday.
Trulieve, the largest marijuana company in Florida, is buying Harvest, the largest marijuana company in Arizona, in a $2.1 billion deal that could create the biggest cannabis company in the nation, the companies announced early Monday.
The blockbuster deal comes just a few months after recreational sales of marijuana launched in Arizona following passage of Proposition 207 in November, allowing anyone 21 or older to possess up to an ounce of marijuana and permitting medical dispensaries to sell it to adults.
If the deal goes through, the merged company will have about 126 dispensaries and operations in 11 states, according to the announcement.
Harvest Health and Recreation Inc. today has 39 operating shops in five states.
Trulieve Cannabis Corp. has 84 operating shops in four states, with 79 of them in Florida.
“We were blown away as I’m sure most of you were in terms of their execution and just the way they moved into the recreational market here in Arizona,” Trulieve CEO Kim Rivers said on a conference call with analysts Monday. “It was seamless and it was really impressive to watch.”
Rivers called the companies a “natural fit.”
“Our teams have worked incredibly well together,” she said. “We are excited to have them as partners moving forward.”
If they merged today, the combined
entity would be the largest U.S. cannabis company based on the combined retail and farming footprint, and it also would be the most profitable marijuana company in the nation, Trulieve and Harvest said.
“We are thrilled to be joining Trulieve, a company that has achieved unrivaled success and scale in its home state of Florida,” Harvest CEO Steve White said in the announcement.
On the call with analysts, White said that the combined company will benefit from the operational knowledge both companies have accumulated on their way to becoming market leaders.
“We will just be able to deliver better products and better experiences to customers across the company,” White said.
Harvest has been involved in big merger negotiations before, with an $850 million deal to purchase Chicagobased Verano Holdings announced in early 2019 before that deal fell apart amid the pandemic last year.
The new deal with Trulieve includes a $100 million breakup fee if either company fails to uphold its end of the deal.
The deal needs approval by Harvest shareholders and various regulators. Similar deals have taken about a year to complete.
While Trulieve doesn’t currently own any shops in Arizona, the companies do have some overlap in Florida and Pennsylvania and California.
Both companies have stock traded on the Canadian market and the over-thecounter market in the U.S.
Markets react to news of sale
Harvest stock shot up Monday on the news, as the proposed purchase price is about a 34% premium to what the company’s value was Friday when the markets closed.
Everyone who owns a share of Harvest stock will get 0.117 of a share in the new Trulieve company.
Harvest shares, which use the ticker symbol HARV, closed Friday at $4.35 per share. They opened Monday at $5.20 on
the early-morning announcement. The stock uses the ticker HRVSF on the U.S. over-the-counter market, where shares saw a similar bump Monday.
Trulieve shares, which use the ticker symbol TRUL, closed Friday at $49.70 per share and were down slightly on the news Monday. The stock uses the ticker TCNNF on the U.S. over-the-counter market, where shares saw a similar drop Monday.
Some analysts thought Trulieve could have found a better acquisition target but also noted the dominance the newly merged company will represent in the U.S. cannabis market.
“With the Harvest deal,
Trulieve gains No. 1 status in Arizona and gets close to No. 1 in Pennsylvania, besides adding to its dominant Florida franchise,” Cantor Fitzgerald & Co. analyst Pablo Zuanic said in a note to investors after the announcement Monday.
He said Trulieve could have looked for better deals to acquire dispensaries in New York or New Jersey, which are expected to be big markets because of their population.
“But we realize Harvest is a fully fledged operation with intrinsic value beyond just assets,” Zuanic said. “It certainly navigated the early start of rec (recreational sales) in Arizona rather well.”
In February, the first full month that recreational marijuana was sold, Harvest saw sales jump from 45% to as much as 248% at its Arizona shops.
Harvest has 15 operating shops in Arizona out of the 143 total dispensary licenses in the state. Fewer than 130 shops are actually operating. The company also has four licenses for shops it plans to eventually open in the state, three this year and one in 2023.
“Trulieve and Harvest are leaders in our markets, recognized for our innovation, brands, and operational expertise with true depth and scale in our businesses,” Rivers said in the announcement.
“We look forward to providing bestin-class service to patients and customers on a broader national scale as we create an iconic US cannabis brand.”