On Wednesday, Curaleaf Holdings (CURA) (CURLF) announced that it had entered into an agreement to acquire GR Companies, also called Grassroots Cannabis. The deal, which involves both cash and stock transactions, will be worth around $875 million. On the deal’s closing, Curaleaf will become the world’s largest cannabis company by revenue.
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Grassroots, a private cannabis company in the US, owns 61 dispensary licenses and currently operates in 20 locations. The company also holds 17 cultivation and processing licenses. On the closing of the acquisition, Curaleaf will own licenses for 131 dispensaries with 68 operational locations. The company will also own 20 cultivation sites and 26 processing facilities. The acquisition will also expand Curaleaf’s presence to 19 states from the current 12.
Curaleaf expects the transaction to close in early 2020. However, it’s subject to customary closing conditions and approval from Grassroots’ stockholders’ and regulatory authorities. After the closing of the transaction, Grassroots’ stockholders will own approximately 16% of Curaleaf on a fully diluted basis. Grassroots’ stockholders will also have the right to appoint one person to Curaleaf’s board after the completion of the transaction. Mitchell Kahn, who cofounded Grassroots in 2014, will be filling that position.
Curaleaf stock’s performance
The announcement by Curaleaf that it will acquire Grassroots has led to an increase in its stock price. On Wednesday at 11:36 AM ET, Curaleaf was trading approximately 17.8% higher than its previous day’s closing price. YTD (year-to-date), the company has returned 31.4% as of July 16. Curaleaf has outperformed the broader equity market, where the S&P 500 Index and the Horizons Marijuana Life Sciences ETF have returned 19.8% and 18.9%, respectively. Also, Curaleaf’s peers MedMen Enterprises, Planet 13 Holdings, and iAnthus Capital Holdings have returned -24.9%, -32.9%, and 78.5% YTD, respectively.
Analysts’ expectations and recommendations for CURA
This year, analysts expect CURA to report revenue of $324.3 million. Year-over-year, the company’s revenue is expected to rise 320.8% from $77.1 million in 2018. The company is expected to turn profitable by reporting a net profit of $24.0 million. In 2018, it incurred a loss of $36.7 million.
Of the eight analysts that follow CURA, three are favoring “strong buy” ratings. The remaining five analysts are advocating “buy” ratings. On average, analysts have given CURA a 12-month price target of 18.08 Canadian dollars, which implies an upside potential of 113% from its current price of 8.49 Canadian dollars.
Last month, on June 27, Curaleaf announced its acquisition of Glendale Greenhouse and Phytotherapeutics Management Services. You can read more about the acquisition in Curaleaf Announces Two Acquisitions for $25.5 million.