A report by Forbes Magazine that Parallel, an Atlanta-based cannabis company run by William “Beau” Wrigley Jr., is, “in talks for a roughly $150 million acquisition of a dispensary chain in Chicago” has set off furious speculation over possible Illinois cannabis acquisitions. The Forbes report also coincides with expectation that six Windy City medical and recreational dispensaries will be changing hands shortly.
Late last year Curaleaf paid $840 million for Chicago-based Grassroots Cannabis, which includes 16 medical and recreational expansion licenses owned by Grassroots-affiliated companies Greenhouse and Windy City Cannabis. As of today, those licenses have not transferred to Curaleaf. There is a state-mandated cap that says individual entities may not own more than 10 dispensaries in Illinois.
Former Grassroots finance executive Brian Schinderle, who is managing the sale of dispensaries as part of that divestment process, would not comment when queried about the status of the sale of Grassroots-affiliated dispensaries. A spokesperson for Curaleaf did not respond to a similar query prior to publication.
As Illinois has delayed issuing new dispensary licenses, current Illinois dispensary license values have skyrocketed. In 2020, Ascend Wellness Holdings is believed to have paid between $50 million and $60 million for medical dispensaries and “plus one” recreational locations (four total) originally owned by Chicago-based Modern Cannabis and Midway Dispensary.
Thus, the high estimate of Ascend’s 2020 purchase price for Illinois dispensaries is $30 million per two-pack of a medical dispensary plus one recreational dispensary.
While valuations for cannabis companies are on the rise, even if speculation is correct, there is a significant gap between a recent $90 million market comp and the $150 million reported by Forbes. It also doesn’t add up that Parallel would pony up $150 million for pot shops and not own its own source of cultivation.
Retail outlets in Illinois, as is the case with other newer states with newer marijuana programs, are often at the mercy of cultivators for reliable access to product, as Grown In also reports this week. Additionally, market investors are currently putting a value on vertical integration in limited licensed states.
Accordingly, it would make sense for Parallel to poach a growing operation in Illinois in addition to a chain of dispensaries.
Illinois cultivation facilities not already tied to a dispensary group or part of a large cash-rich multi-state operator are likely targets for Parallel’s acquisition play. Especially since Parallel is backed by a man Forbes estimated to have a $3 billion personal fortune.
There are only 21 cultivation licenses in Illinois, and most aren’t for sale. An independent cultivation site in Shelby, Illinois appears to be on the verge of being sold to Toronto-based Red White & Bloom Brands.
Numerous Illinois cannabis operators and managers speaking off the record named Phoenix-based 4Front Ventures as a possible acquisition target. 4Front operates two Mission dispensaries and one Illinois Grown Medicine cultivation facility in the state. The two other companies with Illinois growing operations and no dispensaries in the state include Chicago-based Justice Grown and Murphysville, Illinois-based IESO.
Formerly known as Surterra Wellness, Parallel was already well established in Florida’s burgeoning medical marijuana market with 180,000 square-feet of cultivation space and multiple retail dispensaries in 2017 when Wrigley, whose family is known more for chewing gum than funny gummies, led a $65 million financing round to purchase the company.
Wrigley, who ran the family business from 1999 through 2006 and later funded a study that concluded that “chewing gum may be a cost-effective and easily implemented method to increase student performance”, tells Forbes that he believes his new venture will be bigger than his namesake enterprise. After writing the initial $65 million check in 2018, Wrigley took the reins of Parallel as CEO to bring in more capital acquisitions, research and development and expansion. According to Crunchbase, Parallel raised $265 million in equity and debt financing in 2019. Along the way, the company acquired Massachusetts-based Molecular infusions, a cannabis beverage company that boasts of buzz onsets within 10 minutes, and invested heavily in international research and development.