Looking at the future of cannabis, we here at the Institute have identified several key themes which will enable investors to profit from the industry’s growth. Two of those themes are consolidation (mergers and acquisitions) and the need to build national brands.
Those two came together on Monday, when Harvest Health and Recreation(CSE: HARV, OTC: HRVSF) announced its intent to acquire Verano Holdings LLC, a private operator of cannabis facilities.
Both Verano and Harvest are multi-state cannabis companies, and the combined entity is formidable – it instantly becomes one of the largest cannabis companies in the United States when measured by number of facilities.
After the combination and after some construction over the next few months, Harvest will have a presence in 15 states and Puerto Rico, including four recreational states and three more which I expect to allow recreational cannabis this year.
By the end of 2020, Harvest will operate 123 retail dispensaries, 32 production facilities, and 37 cultivation operations.
Of the dispensaries, 30 are open today, with 70 more due to open during 2019. That means the company’s construction plans are front-loaded, which will help revenue ramp up quickly. We’re seeing more and more of these types of big moves across the cannabis industry, and we share more details about how to identify promising cannabis companies looking to make a name for themselves in our brand-new service, the Cannabis Venture Syndicate.
But I have to admit that this particular M&A deal really piqued my interest.
With such expansive operations, it’s making me take a good, long look at Harvest Health and Recreation…
Harvest Health Becomes the Cannabis License King
Harvest will now have the largest license portfolio in the United States.
Now, licenses aren’t everything – revenue and profit are more important – but the licenses give a good indication of where a company hopes to go.
And this deal gives Harvest a much better chance of achieving its goal of becoming the most valuable cannabis company in the world.
Harvest paid a full and fair price for Verano’s assets, which is good news for many of the current holdings in the Cannabis Investor’s Report model portfolio – it establishes a floor for the value of retail cannabis assets and for production facilities in much of the country.
On top of that, it also sets the stage for more blockbuster deals during 2019 as companies compete to dominate the cannabis market. If you’ve been investing for a while, you know that companies are willing to pay a premium to buy another firm if it will help them grow faster.
Instead of building something from scratch, sometimes it just makes more sense to buy an established operation with a track record of success. If you want to dig through our “Vault” to try and find potential takeover targets, you can learn how to access it here.
And while I’m intrigued by this news, it happened so fast that I still have some due diligence that I need to perform.
When looking at the Harvest/Verano merger, I’ll need to decide if it warrants an upgrade in our rating on NICILytics. I’ll also be reviewing if this means Harvest makes the cut for the Cannabis Investor’s Report model portfolio.
Remember, cannabis stocks offer us the opportunity to see massive gains with life-altering potential, but that doesn’t mean we’re just going to add any pick to our portfolio and hope for the best. It takes a lot to pass my test of what deserves to go in, so look for a follow-up report after I get a chance to talk to Harvest’s management.
Full story at the National Institute for Cannabis Investors.