Columbia Care expands in Southern California (CCHWF)
CCHWF is a Hedgeye Cannabis Best Idea LONG.
Today, Columbia Care announced it had acquired The Healing Center San Diego (“THCSD”), one of the leading dispensaries in Southern California, for approximately $15.0 million. The purchase price represents approximately 1.2x, and 4.7x estimated 2021 revenue and Adjusted EBITDA, respectively.
Acquiring THCSD enhances Columbia Care’s retail presence and scale in California, further leveraging its Balboa facility's existing manufacturing capabilities and the cultivation, retail, portfolio of market-leading brands, and wholesale distribution of its recent acquisition, Project Cannabis. The company, one of the leading, fully integrated operators in the state, now has three dispensaries and one indoor cultivation facility in Los Angeles; two dispensaries and one GMP quality manufacturing facility in San Diego; several acres of outdoor cultivation capacity in Desert Hot Springs; and one dispensary in San Francisco. The company also has state-wide distribution and wholesale relationships with more than 100 dispensaries.
This acquisition follows the completion of its $69 million acquisition of Project Cannabis in California, and the more recently announced acquisition of Green Leaf Medical, a Mid-Atlantic cannabis company, for $240 million.
Illinois lawmakers move closer to resolving licensing debacle (CRLBF, GTBIF, CURLF, CCHWF, ACRHF)
Illinois lawmakers and Gov. J.B. Pritzker’s administration representatives have reportedly made significant progress this week towards a bill that could potentially resolve the state’s licensing issue for social equity applicants. Last spring, 937 businesses applied for 75 adult-use dispensary licenses. However, only 21 of those businesses achieved perfect scores on their applications to qualify for the state lottery to issue those licenses. The applicant scoring was ostensibly meant to advantage social equity applicants, or those applicants representing communities disproportionately impacted by the war on drugs. However, the 21 qualifying applicants were primarily wealthy and politically connected individuals, which prompted an uproar against the scoring process and lawsuits.
A new bill is meant to be introduced in the lame-duck session starting today, ahead of January 13th, when the state’s new lawmakers will be sworn in.
Solving this licensing imbroglio will benefit both social equity applicants and cannabis companies with significant wholesale operations. Currently, there are just over 80 dispensaries in the state, serving a population of more than 8.6 million adults 21 and over. Despite the market being underserved, Illinois still eclipsed $1 billion in legal sales in 2020. The addition of 75 licenses would significantly enlarge the wholesale opportunity for the state’s largest cultivators, Cresco Labs, and Green Thumb Industries.
Curaleaf to raise C$275 million in share offering (CURLF)
CURLF is on the Hedgeye Cannabis LONG Bias List.
Curaleaf announced the pricing of its previously announced overnight marketed offering of an aggregate of 16.5 million subordinate voting shares at a price of C$16.70 per share for total gross proceeds of C$275.6 million (US$216.6 million). The company intends to use the net proceeds for working capital and general corporate purposes.
CEO Boris Jordan commented, “As the U.S. cannabis industry continues to enjoy tremendous growth, and now with the Georgia results confirming Democratic control of the Senate, we anticipate the acceleration of legalization at the federal level and consequently, newly enhanced opportunities in the sector. With the recent adult-use cannabis deregulation initiatives in New Jersey and Arizona, and New York announcing its proposal to legalize and create a comprehensive system to oversee and regulate cannabis as part of the 2021 State of the State, now is a pivotal time to raise additional capital to support our growth initiatives as we continue to build out our capabilities in these new markets. With the added balance sheet flexibility this offering will provide, Curaleaf will be increasingly well-positioned to leverage potential high-return organic and well as inorganic growth opportunities in the future."
