Beyond The Press Release: Curaleaf & Arrow Alternative, Cresco & Tryke, Harvest Health & High Times
- sci
- May 4, 2020
- 4 min read
Updated: Jun 7, 2020
Curaleaf & Three Arrow Deal Terms Revealed
Announced on March 24, Curaleaf gave notice that they were to acquire Three Arrow Alternative Care and their portfolio of dispensaries.
Serving Connecticut's medical cannabis market and its nearly 42,000 patients with three dispensaries, these storefront will now complement Curaleaf's cultivation operations – 60,000 square feet in Simsbury – and now enables the company to operate vertically within the state.
Curaleaf is just one of four cannabis producers in this market, and now owns three of the fourteen dispensaries that serve the state. Curaleaf, by way of their pending acquisition of Grassroots, also possess a dispensary license in Groton.
Although the terms of the transaction were not initially released, we have learned that the deal cost Curaleaf an aggregate of $38 million; $16.4 million in cash and $21.6 million in shares.
Additionally, Curaleaf has only officially closed this transaction for the Hartford and Stamford locations – the transaction for Three Arrow's Milford dispensary is expected to close on, or about, August 1, 2020.
The shares used specifically for the Stamford location were priced at $6.52 USD (approximately 1.88 million shares). The shares used for the Milford dispensary will be the greater of either $6.52 USD, or 85% of the 30-day volume weighted average price of Curaleaf's share price ending two days prior to the closing of the transaction. The Hartford location was purchased with $10.5 million of cash.
All shares utilized in this transaction are subject to a lock-up period until April 4, 2022.
Interested in keeping up to date with all forthcoming earning reports and share unlocks, including the unlock associated with the Curaleaf/Three Arrow transaction? Visit our Calendar for more details.
Cresco Labs Cancels Tryke Transaction
Just moments before releasing their fourth quarter earnings on April 27, Cresco Labs announced they had terminated their pending acquisition of Tryke – a company with vertically-integrated operations in both Nevada and Arizona – citing the deal's dissolution was related to regulatory delays, a decline in capital markets, and, now, COVID-19.
The initial agreement was pinned at $282.5 million, which was payable by $55 million in cash and $227.5 million in Cresco shares.
Back in September 2019, on the day of the acquisition announcement, Cresco Labs was trading at $7.14 USD. On the day of the cancellation announcement, shares of the company were trading at $3.65; down roughly 51% since the deal was announced.
For perspective, if the deal hypothetically closed on April 27, Cresco Labs would have diluted their share count by about 16.5% (62.5 million shares), alongside giving up $55 million in cash. The company ended Q4 with $49 million in their coffers (although they have recently undertaken various capital-raising initiatives), and, with respect to the recently closed Origin House acquisition, about 377.7 million shares on a fully-diluted basis.
In 2018, between their Nevada and Arizona operations, Tryke generated $70.4 million in revenue and $24.6 million in EBITDA. Cresco noted that this made Tryke "one of the highest grossing and most profitable private cananbis companies in the U.S. market."
While Cresco Labs must now forego pursuing a more robust presence in Arizona and Nevada - no longer boasting vertical-integration in Nevada, although they do have a dispensary and production facility in Arizona - the company has stated their focus will now pivot towards expanding within their existing markets.
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Harvest Health Sells Assets To High Times
On April 28, Harvest Health & Recreation issued a news release detailing that they would be selling 13 operational and planned dispensaries to High Times for the total consideration of $80 million. This would be paid by High Times by way of issuing Harvest "$5 million in cash, $7.5 million as a one-year promissory note with 10% interest, and $67.5 million in Series A Preferred Stock".
As denoted in the press release, the rationale behind this divestiture of retail assets was inspired by the company's intention to focus on their current – and expanding operations – in their core markets of Arizona, Florida, Maryland, and Pennsylvania. The company plans to maintain their remaining retail presence in California.
Although the press release is discernibly light on the details, a recent SEC filing goes into the particulars.
The retail assets that Harvest plans to give up is a mixture of presently operating, Harvest-branded dispensaries, de novo license awards, and facilities (both operational and licenses-held) recently acquired from Interurban Capital Group:
Six operational dispensaries located in Palm Springs, Venice, Oakland (2 stores), Coalinga, and Santa Cruz.
Seven dispensary licenses for retail locations to-be situated in Merced, Riverside, Hanford, Blythe, and San Francisco (2 licenses), and San Bernardino.
The licenses and monetary breakdown of assets to be sold to High Times can be seen in the below image:
New Resource
Inspired by all of the M&A activity mentioned in this particular post, we now have a new resource to share: M&A Tracker.
As the name would suggest, this table intends to maintain pertinent details on all of the presently pending M&A transactions from all of the companies we currently cover on the website.
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