Illinois, with a finite number of cannabis companies licensed to grow, manufacture and sell marijuana to what is already a ten digit consumer market, is an attractive state for fast-growing pot companies to operate. 

Multiple investors, executives, and independent operators speaking on background to Grown In say that this dynamic, perhaps exacerbated by the state’s impotent efforts to expand cannabis license ownership to social equity entrepreneurs, is contributing to a sellers market for independent medical dispensary operators that also have the right to sell recreational products from two locations. 

The prospective buyers bidding for these assets right now, for the most part, are multi-state cannabis corporations that already have cultivation and manufacturing operations in the state. Companies with these attributes include Chicago-based Verano Holdings, which investors believe positioned itself for an imminent public offering after its recent merger with Florida-based AltMed and PharmaCann, which has a wide array of investors that re-upped after its divorce from MedMen was finalized earlier this year. 

New York-based Ascend Wellness Holdings, widely expected to go public in 2021, began buying into the Illinois market two years ago with its acquisition of HCI Alternatives, which included cultivation facilities and retail stores. In August, Ascend acquired MOCA’s medical and recreational dispensaries in Chicago for about $30 million. 

The pot playbook for publicly traded companies is to maximize vertically-integrated operations in states where licenses are limited. In Illinois right now, this means owning five medical dispensaries and five additional “plus one” recreational dispensaries. These licensed cannabis couplings were awarded to incumbent medical marijuana companies operating in Illinois when recreational sales laws were written and approved last year.

Publicly traded Green Thumb Industries, based in Chicago and owner of cultivation and processing facilities and at least seven dispensaries in Illinois, is leveraging these efficiencies to impress investors to the tune of a $5.8 billion market valuation. Cresco Labs, also based in Chicago, vertically integrated and owner of a maximum 10 dispensaries, is valued at a $2.3 billion market cap which is up five times from what it was trading earlier in the year. 

Meanwhile, six of the 16 dispensaries previously owned by entities associated with Grassroots Cannabis, are expected to be sold in the coming weeks. When Grassroots was acquired by Massachusetts-based Curaleaf for nearly $900 million earlier this year, only ten of the 16 Illinois Grassroots dispensaries branded as Greenhouse and Windy City Cannabis were allowed to transfer in order to adhere to the state-mandated 10 dispensary cap. 

A sale process of three medical plus-one dispensaries from Greenhouse/Windy City is nearing a conclusion, say multiple individuals familiar or involved in potential transactions. This will result in CuraLeaf officially owning and operating the ten dispensaries it deemed most valuable, as well as new ownership of the remaining six entities. In addition to MSO suitors, companies and investment groups with no existing ties to cannabis are in the bidding process. This seems to be driving up the price and the amount of cash required up front to acquire these lucrative assets. 

As the industry continues to normalize in 2021, practitioners and analysts predict a wave of additional mergers and acquisition activity. Most if not all (everyone has a price) independent operators in the state are in play. Well-capitalized independents could also become buyers. 

Outside of the divested Grassroots assets, Chicago’s Midway Dispensary appears to be next in line for take-off.

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Brad Spirrison is a journalist, serial entrepreneur and media ecologist. He lives in Chicago with his son. Interests include music, meditation and Miles Davis.