It’s being called a North American marijuana conglomerate. It’s also the largest-ever public company acquisition in the U.S. cannabis sector. It’s the $1.1-billion deal that will see Canadian marijuana brands company Origin House being bought out by Chicago-based Cresco Labs Inc (OTC:CRLBF), which was announced Monday.
It’s the merger that is attracting all the buzz this week in the pot markets. It’s also further evidence of how the emerging weed market is growing exponentially by the month as companies continue to jockey for position as legalization continues to roll out across Canada and quietly gains traction on a state-by-state level in the U.S.
The Cresco Labs deal is an all-stock transaction that will see the U.S. marijuana retailer that is active in 11 states acquire Ottawa-based Origin House, which is the trade name for the CannaRoyalty Corp (SNX:OH)., which is listed on the Canadian Securities Exchange.
Stocks of CannaRoyalty opened March 31 trading at $11.45, hitting a peak at $12.16 later that day and closed at $12.05. Yesterday, the stock climbed from a previous close of $11.65 to $11.95. The company went public in late 2016. For stock holders, the company’s shares went from $2.94 in January 2017, to $4.12 in January 2018 to $9.60 in January earlier this year and sat at $11.95 at today’s open – a 306-percent increase.
Unlike some of the recent deals that have made headlines in the past few months involving Canadian-based marijuana companies signing partnership deals with major American beverage, tobacco or pharmaceutical firms focused on the medical and cannabinoid sectors, the Cresco Labs deal is clearly aimed at the recreational side of the marijuana trade – a space that is all about brands and brand recognition.
According to a joint statement issued by Origin House and Cresco Labs earlier this week, the deal is all about expansion on both sides of the border. But more specifically for Origin House its about gaining access to the large U.S. market. One of its strengths that will be leveraged in this deal is the more than 50 brands it currently markets in more than 500 outlets in California.
“This transaction is directly aligned with our strategy to build a leading portfolio of cannabis brands in California and to rapidly and accretively take those brands to the rest of the U.S. market, as well as the Canadian market,” said Origin House chairman and chief executive Marc Lustig in a release.
“By partnering with one of the largest and most innovative U.S. multi-state operators in existence today, Origin House will supercharge its growth and be in a position to offer its brand partners access to 10 additional states, with licenses and supporting infrastructure already in place.”
The deal is still subject to regulatory and shareholder approval, and expected to be finalized by the end of June. Once completed, Origin House shareholders will own about 20 percent of the new combined company.