While the cannabis industry as a whole has begun pumping the breaks on expansion efforts in the midst of a revenue crunch, a number of acquisitions are still going forward. Today Harvest Health & Recreation, Inc. (CSE: HARV, OTCQX: HRVSF) announced the company’s planned buyout of Verano Holdings, LLC is moving into the next phase.
In the press release both management teams used strong language to describe their intent to close this deal, in contrast to recent acquisitions that sound like they are moving forward but on revised terms.
Verano does operate in the most attractive medical cannabis market in the U.S., which could explain Harvest’s desire to close the acquisition as it stands even with the stock prices across the sector down big since the deal announcement.
Cannabis sales in Florida are up 150% since March when the deal was announced, meaning Verano is even more attractive to Harvest than it was back when the deal was announced.
What investors should take away from all this is that not all deals are created equal — making a thorough understanding of the assets behind each acquisition key to forecast the chances of deal’s success.
Details of the Announcement
Harvest’s planned acquisition had seen a request for additional information from the U.S. Department of Justice Antitrust Division earlier in the year. Now that both Harvest and Verano complied with the request and submitted their responses, a 30-day waiting period must occur before the deal can close.
If both parties still agree to the acquisition terms, it can close after Dec. 4 when the waiting period ends if there are no further actions by the Department of Justice impeding the transaction.
Discussing the impending end of the waiting period, Harvest’s Chief Executive Officer Steve White commented:
As cannabis producer stock prices have dropped across the board, a number of high-profile acquisitions have seen renegotiated terms or been put on hold. The Cresco Labs Inc. (CSE: CL; OTCQX: CRLBF) buyout of Origin House is notably in limbo at the moment following the expiration of the deal’s waiting period.
Unlike that deal, which is currently undergoing a new round of negotiations, both Verano and Harvest have indicated their intent to move forward with completion by the end of the year.
Those acquisitions that have closed haven’t always led to increased revenue or even product production this year. A Niagara-based facility acquired by HEXO Corp. (TSX: HEXO; NYSE: HEXO) in the buyout of Newstrike Brands is notably sitting empty and no longer cultivating any plants. The winding down of that facility arrived as HEXO culled 200 jobs to reorganize operations and cull costs earlier in the year.
In other company news, Harvest is also in the process of moving forward with acquisitions of Falcon International Corp and CannaPharmacy Inc.