The Cannabist Derisks Balance Sheet as Verano Acquires Virginia and Arizona Operations
The TDR Three Key Takeaways: Verano Acquires The Cannabist’s Virginia and Arizona Operations
- Verano is acquiring The Cannabist Company’s Virginia and Arizona operations for $105 million.
- Based on TDR Research calculations, the value received by The Cannabist could be worth $165 million and would significantly derisk the company’s balance sheet.
- Verano’s footprint in Arizona will grow to 90,000 square feet of cultivation space and eight dispensaries.
Verano Holdings Corp. (OTCQX: VRNOF, CA: VRNO) has agreed to acquire The Cannabist Company Holdings Inc. (Cboe CA: CBST, OTCQX: CBSTF) operations in Virginia and Arizona for $105 million. This acquisition will significantly enhance Verano’s market presence and allow The Cananbist Company to derisk its balance sheet.
In Virginia, Verano will acquire Columbia Care Eastern Virginia LLC, making it the sole cannabis operator for Health Service Area (HSA) 5, which includes major cities such as Virginia Beach, Chesapeake, and Norfolk. This area is home to nearly two million residents. The Virginia operations include one cultivation and production facility and six dispensaries. The unique structure of Virginia’s cannabis program, which permits only one cannabis operator per HSA, provides Verano with a significant competitive advantage. Additionally, Virginia’s program allows home delivery across the state and wholesale opportunities to other HSAs, enabling Verano to serve patients statewide.
The total consideration for the Virginia operations is $90 million, to be paid with $20 million in cash, $40 million in Class A subordinate voting shares, and a $30 million promissory note. Based on our internal research at TDR, the Class A shares of Verano could be worth $10.08 per share or $102M compared to the current market price of $40 million. The proceeds from the financing will allow The Cannabist Company to deleverage its balance sheet. Depending on the terms of the shares and promissory note (note yet fully disclosed), the proceeds would significantly improve the company’s current ratio and total asset to total liability ratios, putting The Cannabist Company closer to a similar risk profile as its peers for financial leverage.
Verano will acquire 203 Organix, L.L.C. and Salubrious Wellness Center, Inc in Arizona. This acquisition includes one cultivation facility, a production facility, and dispensaries. Upon closing, Verano’s total cultivation footprint in Arizona will expand to 90,000 square feet across three facilities, and its dispensary count will increase to eight, with new locations in Tempe and Prescott.
Once these acquisitions are finalized, Verano’s operational footprint will span 14 states, with 15 cultivation and production facilities and 150 dispensaries. This expansion aligns with Verano’s strategy of entering and scaling operations in limited-license markets to enhance both wholesale and retail capabilities.
George Archos, Verano’s Chairman and CEO, stated, “Today’s agreement further diversifies Verano’s portfolio, which, since the company’s inception, has remained focused on expanding our business into limited-license markets to scale both our wholesale and retail operations. This opportunity greatly increases Verano’s growth trajectory as we gain access to the coveted market of Virginia ahead of an adult-use program and deepens our footprint in Arizona.”
The Cannabist Company will retain its operations in the Richmond, Virginia area (HSA 4), maintaining approximately 80,000 square feet of cultivation and manufacturing capacity, five retail locations, and one additional location in development.
David Hart, CEO of The Cannabist Company, expressed his optimism about the agreement, saying, “We are pleased to have reached an agreement and look forward to welcoming Verano to the robust Virginia market. We are so proud of what our Eastern Virginia and Arizona teams have accomplished and look forward to seeing the Verano team support their continued successes.”
These acquisitions are subject to regulatory approvals and other closing conditions represent a significant step for both Verano and The Cannabist Company.
