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Multi-state cannabis operator Verano Holdings Corp. (OTCQX:VRNOF) closed the acquisition of three subsidiaries of The Cannabist Company Holdings Inc. (OTCQX:CBSTF), one of the most experienced cultivators, manufacturers and retailers of cannabis products in the U.S.
The company first announced the $105M deal in July. The acquisition, strategic to expanding its national footprint, includes one of Cannabist’s Virginia licenses (Columbia Care Eastern Virginia), along with associated operations including all operations in Arizona (203 Organix and Salubrious Wellness Center).
"Our entrance into Virginia provides near-term growth potential within the existing medical program, and adds yet another valuable market to our footprint with a high probability of adult use in the near future," stated George Archos, Verano founder, chairman and chief executive officer. "Leveraging our extensive M&A history and experience, we are actively integrating these facilities into our network, and will build on our legacy as a top-tier medical operator in preparation for potential adult use in Virginia. Additionally, expanding our Arizona operations allows us to further scale our retail footprint and broaden access to our award-winning brand portfolio with increased cultivation capacity and high-performing dispensaries in attractive locations in Prescott and Tempe."
In Virginia, Verano will be the sole vertically-integrated cannabis operator in Health Service Area (HSA) 5, which encompasses Eastern Virginia, including cities such as Hampton, Norfolk, Portsmouth, Suffolk, Virginia Beach and Williamsburg. This region, home to nearly two million residents and attracting 14 million tourists annually, is designated by the state for organizing healthcare services and resources. Verano will gain an active cultivation and production facility along with six operational dispensaries in this critical area.
In Arizona, Verano expands its operations with the addition of an active cultivation and production facility, boosting its retail presence to eight locations with new dispensaries in Tempe and Prescott. These additions complement the company's existing six Zen Leaf dispensaries and multiple cultivation and processing facilities across the state.
The total consideration for the Arizona operations was $15 million, paid in cash upon signing, subject to adjustments. For the Virginia operations, the total consideration amounted to $90 million, which was paid upon closing and consisted of $20 million in cash, $40 million in Class A subordinate voting shares, and a $30 million promissory note.
David Hart, CEO of The Cannabist Company, commented, "Verano has been a great partner through a very thoughtful transaction, and we are excited for what the future holds for our Eastern Virginia and Arizona teams with Verano. This was a critical move for us as we continue our path of building a better business and reshaping our footprint to improve our financial footing, ultimately bringing us closer to profitability. We look forward to working alongside Verano in Virginia as we continue in the Richmond region to support a growing medical program and look toward the future of adult use. Thank you to everyone involved for making this a success."
The Cannabist Company will maintain its Virginia operations in the Richmond region (HSA 4), with approximately 80,000 square feet of cultivation and manufacturing capacity, five retail locations in operation and one in development. With the close of the Arizona transaction, The Cannabist Company now operates in 14 markets, which will be reduced to 12 markets once the exits in Florida and Washington, DC are finalized.
Verano shares are trading down roughly 1% on Thursday morning, at $3.90. Cannabist is trading up 2.24% at $0.28 per share.
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