Curaleaf Holdings has signed a definitive agreement to acquire GR Companies, Inc., the largest private vertically-integrated multi-state operator, in a cash and stock deal valued at approximately $875 million. This transaction solidifies Curaleaf’s position as the world’s largest cannabis company by revenue and the largest in the U.S. across key operating metrics.
The highly complementary acquisition brings together the largest public and largest private multi-state operators in the U.S. to offer a full range of products to consumers in states across the country. As a market leader throughout the Midwest, Grassroots has a portfolio of 61 dispensary licenses, with 20 operating today, and 17 cultivation and processing licenses that will substantially accelerate Curaleaf’s continued expansion across the nation.
Grassroots has a leading presence in large markets in which Curaleaf presently does not operate, including Illinois, which in June became the 11th state to legalize adult-use cannabis, and Pennsylvania, the fifth most populous state in the U.S. The proposed transaction will expand Curaleaf’s presence from 12 to 19 states, and the combined company will have 131 dispensary licenses, 68 operational locations, 20 cultivation sites and 26 processing facilities1. With the acquisition, Curaleaf will also add new markets in Arkansas, Michigan, North Dakota, Oklahoma, and Vermont, and build on its existing businesses in Connecticut, Maryland, Nevada and Ohio. Upon completion of the proposed transaction, Curaleaf will be the largest medical and adult-use cannabis company with access to a total population of approximately 177 million people.
“With the acquisition of Grassroots and the pending acquisition of Select, Curaleaf is the world’s largest cannabis company by both revenue and operating presence,” said Joseph Lusardi, CEO of Curaleaf. “With a combined 68 open dispensaries, this transaction significantly accelerates our expansion strategy and strengthens our reach across the medical and adult-use markets. In addition, it enhances the depth of our retail and wholesale platform across the country. By leveraging our scale, as well as our market-leading capabilities and expertise, we will continue to deliver value for our shareholders.”
Mitch Kahn, co-founder and CEO of Grassroots, said, “Today’s announcement is a testament to the hard work of the many employees that helped make Grassroots the leading cannabis company in the Midwest. This acquisition will enable us to give our patients and retail partners greater access to products that adhere to the highest standards of quality and reliability, and our employees the opportunity to be part of a best-in-class operator.”
This transaction builds on the numerous strategic transactions announced to date in 2019 which expanded Curaleaf’s footprint in Arizona, California, Nevada and Ohio, continuing to differentiate the company as the most accessible cannabis brand across the U.S. The combined entity’s geographic reach, purchasing power, economies of scale and joint best practices solidifies its top position amongst U.S. multi-state operators.
Transaction Terms and Approvals
Curaleaf will acquire Grassroots for total consideration of approximately $875 million, composed of $75 million in cash, 102.8 million subordinate voting shares of Curaleaf2, and $40 million in Curaleaf shares priced at the 10-day volume-weighted average price prior to closing of the transaction. At closing, securityholders in Grassroots will have approximately 16% pro forma ownership of Curaleaf on a fully-diluted basis after giving effect for the Select acquisition.
The proposed transaction is expected to close in early 2020, subject to customary closing conditions, Grassroots’ stockholders’ approval and regulatory approvals. The transaction has been unanimously approved by the Boards of Directors at both companies.
Management and Board
The Grassroots management team brings deep experience in the Midwest market, elevating the combined entity’s expertise in retail, real estate, legal and licensing, finance, marketing, brand development, sales and logistics.
At the closing of the proposed transaction, the core security holders of Grassroots will have, as a group, the right to appoint one person to serve on the Curaleaf Board of Directors. Mitch Kahn, co-founder and CEO of Grassroots, will fill the allotted board seat. Kahn co-founded Grassroots in 2014 and brings with him more than 20 years of executive experience.
Additionally, co-founders Matt Darin and Steve Weisman will join Curaleaf’s senior management team. Darin, Chief Operating Officer of Grassroots, has more than 15 years of experience as an entrepreneur and executive in the cannabis and commercial real estate industries. Weisman, Chief Strategy Officer of Grassroots, has extensive entrepreneurial and corporate governance experience as an attorney at Kirkland & Ellis in Chicago.Eight Capital acted as financial advisor to Curaleaf and its board of directors. Eight Capital also provided Curaleaf with a fairness opinion. Loeb & Loeb LLP and Stikeman Elliott LLP acted as legal advisors to Curaleaf. Canaccord Genuity Corp. and Stoic Advisory Inc. acted as financial advisors to Grassroots. Canaccord Genuity Corp. also provided a fairness opinion to Grassroots, and Katten Muchin Rosenman LLP acted as legal advisor to Grassroots.