Chicago-based Verano Holdings, among the largest cultivators in Illinois with operations in 12 states, announced on Wednesday the signing of “a definitive merger agreement” with Sarasota-based Alternative Medical Enterprises (AltMed), which operates cultivation facilities and MUV-branded retail locations in Florida and Arizona.
Terms of the transaction were not disclosed, although Wednesday’s press release indicated that current Verano CEO George Archos will run the combined company. Leadership of previously family-owned AltMed will also have a presence on the combined company’s management and board of directors.
With eight cultivation facilities and 44 retail locations across 14 states, Verano is arguably the largest privately-held cannabis company in the United States. The company now formally asserts that it is “one of the largest three MSO’s based in the United States based on 2021 internal projections.”
In Illinois, a budding epicenter of MSOs, Verano operates a significant cultivation facility in Albion and Zen Leaf dispensaries in St. Charles and Aurora. The company is announcing new locations in Naperville and other areas with a clear intention to reach the maximum of owning 10 dispensaries in the state. The company also operates one dispensary in Buchanan, Michigan, about 100 miles from Chicago.
As a privately-held company, Verano does not have to disclose financials. Verano executives did not return queries by Grown In for comment on the transaction by publication. But according to Crunchbase, Verano has raised $120 million in venture funding since its founding in 2018.
As a point of comparison, publicly traded Green Thumb Industries, also based in Chicago, currently operates 13 manufacturing facilities and has licenses for 96 retail locations in 12 U.S. markets. Chicago-based Cresco Labs, the other publicly traded multi-state cannabis operator based in the Midwest, has 15 manufacturing facilities and has licenses for 29 retail locations across the United States.
In March, Verano agreed to terminate a merger with Phoenix-based Harvest Health & Recreation, an all-stock transaction that would have valued Verano at $850 million when it was first announced in April 2019. With its breadth of cultivation and retail assets, particularly in states like Illinois and New Jersey where licenses are limited and incumbent operators with capital reign supreme, Verano today is in expansion mode.
Combined with AltMed, Verano now has 220,000-square feet of production facilities and 26 dispensaries in Florida. While there is no current pathway for adult-use legalization in the state, there are currently 400,000 medical card holders among a population of 20 million residents. Edibles were recently made legal for medical customers for the first time.
The sunshine state’s medical marijuana program generated $660 million in sales in 2019, up 175-percent from one year earlier. Only vertically-integrated companies with cultivation, processing and retail can participate in the program, which is dominated by publicly-traded Trulieve. Trulieve operates 55 dispensaries across the state and claims “its vertically-integrated seed-to-sale operation has approximately 51 percent of the Florida market.”
“Florida is the market everyone has their eyes on,” says Rob Friedman, CEO of Cannabis LAB, an industry networking and education company based in Miami. “MUV has a great reputation as a company, and they are also known for having a quality product.”
As part of the deal, Verano will pick up a 30,000 square-foot indoor production facility in Arizona as well as one MUV dispensary in Phoenix.
Arizona voters on November 3 said yes to adult-use cannabis sales, which is expected to begin in the coming months. In 2019 the state’s approximately 220,000 medical customers, according to multiple estimates, purchased nearly $600 million of cannabis.
Those companies holding the more than 125 medical licenses in the state will be authorized to sell to recreational customers upon legalization. Harvest and CuraLeaf are among the largest operators in the state. Cresco has one cultivation and one retail location in the state.
The state is also planning to extend additional licensure to regions with only one dispensary and to social equity applicants.
“It’s extremely important that the state does something meaningful on social equity,” explains industry consultant author Ingrid Joiya-Warrick, a Chicago native who as part of The 40 Acres and Mule holding company also oversees dozens of applications for dispensaries and craft growns in Illinois. “But the MSOs and other companies are going to benefit like they always do.”
Today, both Verano and AltMed report profitability. It’s unclear if the new company will raise additional capital to obtain more licenses and build out additional dispensaries. Observers say that shareholders of privately-held companies that reach 10-digits tend to want to cash out.
“The biggest word in their press release is ‘accretive’”, said Jon Paul, a veteran CFO who helped take California edibles company PlusOne public in 2018. “Will they go after more licenses? Where will there be savings to pick? What adjustments will they make to AltMed?”