Eric Vengroff, Financial Analyst

On July 17th, two cannabis company acquisitions were announced and in some way, they are reflective of the relative strength and direction of the cannabis industry on both sides of the Canada-U.S. border. The first and larger of the two deals was announced by Curaleaf Holdings, Inc. (CSE: CURA) (OTCQX: CURLF), a company covered extensively in the pages of Cannabis Daily and a leading cannabis operator in the United States. The company has signed an agreement to acquire GR Companies, Inc., otherwise known as Grassroots, the largest private multi-state operator in the U.S., in a cash and stock deal valued at approximately $875 million US. The company now claims that it will be the world’s largest cannabis company by revenue post-closing.

Grassroots has a portfolio of 61 dispensary licenses, 20 operating, and 17 cultivation and processing licenses and has a leading presence in markets in which Curaleaf presently does not operate, including Illinois, which legalized adult-use cannabis in June (now the 11th state to do so) and Pennsylvania, where only medical use is authorized, but decriminalization is being discussed by state lawmakers in a 2019 listening tour. 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.
In the second deal announced today The Supreme Cannabis Company, Inc.(TSX: FIRE) (OTCQX: SPRWF) (FRA: 53S1) announced that it has entered into an agreement to acquire all of the issued and outstanding shares of privately-held Truverra Inc. in a deal with an approximate dollar value of $20 million CDN. Located in Toronto, Truverra is a private cannabis company and operates a small facility in Toronto that Supreme Cannabis intends to repurpose to produce high-quality cannabis extracts, including concentrates and vaping liquids. Truverra Europe, is located in the Netherlands and sells a broad portfolio of hemp-based CBD products into select European markets, according to the release.

As Health Canada’s amended cannabis regulations roll out this fall, Supreme believes it will be positioned to lead in the cannabis extracts markets. “With the acquisition of Truverra, we secure a Toronto-based facility equipped to extract our high-quality inputs for concentrates and vaping liquids in the near-term,” said Navdeep Dhaliwal, CEO of Supreme Cannabis.
In some respects the contrasts are both stark and interesting. There’s no disputing the difference in scale population-wise. Eleven states worth of people is 4.5x the size of Canada; however the size differential of the two deals is in excess of 50x when currencies are taken into account. This speaks to the relative speed at which the commercial opportunities have developed between Canada, where it is legal nationally to consume cannabis recreationally as an adult, and the U.S., where only a few pieces of the map have been colored in. Product-wise, items that have been freely available in many jurisdictions in the U.S. (as well as illicitly in Canada) will only see their Canadian analogs appearing on shelves (perhaps) this fall. The pace is glacial, the regulations conservative, and the demands of the marketplace are being met elsewhere. With the top cap companies now controlled out of the U.S. and the pace of change and innovation also being set there, it is hard to see how Canadian companies can sustain the once bold belief that early adoption of cannabis legalization in Canada would make them world leaders in this industry.

The information and opinions presented here are that of the author and do not represent the thoughts and opinions of this website.  The analyst  does not own and does not represent any of the companies listed in this article and receives no compensation from any party mentioned in this article. Readers are urged to do their own research and due diligence and should seek advice from an independent financial advisor before making any financial investment.

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