The exterior of Herbal Remedies original dispensary in Quincy, IL.

Herbal Remedies Dispensaries, a pair of adult-use and medical cannabis dispensaries in Quincy, Illinois, agreed last week to be acquired for $30 million by New York-based, multi-state cannabis operator Ayr Wellness. Herbal Remedies, one of Illinois’ few remaining independently-owned dispensaries, was among the first cannabis retailers in Illinois, launching in 2016 as a medical dispensary. 

A July 20 acquisition announcement released by Ayr said the transaction is scheduled to close later this year.

The vast majority of the state’s 110 current retail outlets and 20 cultivation licenses are owned by a handful of incumbent operators that in most cases expanded to other states, as well as out-of-state operators increasingly buying their way into a market approaching $2 billion in annual sales. 

Last April, Atlanta-based Parallel, a Special Purpose Acquisition Company led by William “Beau” Wrigley, agreed to acquire six dozen Windy City Cannabis locations for as much as $155 million in cash and equity. That transaction is awaiting approval by the Illinois Department of Finance and Professional Regulation, a process that often takes several months to complete. Last year, New York-based Ascend Wellness Holdings paid as much as $60 million dollars to acquire two medical dispensaries and two recreational dispensaries from Chicago-area operators Modern Cannabis and Midway Dispensary in separate transactions.

The handful of remaining independently-owned cannabis operators in Illinois, some vertically integrated and some restricted to retail or cultivation, continue to be courted by multistate cannabis operators seeking access the highly regulated Illinois market that, despite movement in the awarding of social equity licenses last week, will continue to be dominated by a fortunate few for the foreseeable future. 

“Without being vertically-integrated it makes it very difficult to compete,” said Herbal Remedies co-owner Kris Wildrick, adding that she believes Ayr was the right partner in which to “pass the baton” because of their commitment to retain her staff and as well as their presence bringing a new player to the state’s highly concentrated cannabis cohort. “Looking at the industry when it first started, compared to today, you see something very different.”

Ayr, also a cannabis SPAC, is acquiring assets in states with similar regulatory frameworks as Illinois, where competition is limited and where potential buyers are plentiful, including Ohio, Pennsylvania, New Jersey, Massachusetts, Florida, Nevada, and Arizona.

With Illinois potentially ready to award 200 retail licenses and 100 more craft grow licenses in 2021, it is unclear how new entrants will impact the value of incumbent independent companies debating to sell or just keep on growing while the market is high. 

“The valuations for dispensaries will decline over time as eventually getting a license will be the equivalent of opening up a liquor store,” predicts cannabis investment banker Steve Earnest. “But as of now that doesn’t matter because demand outstrips supply.”

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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.