Trulieve Cannabis plans to acquire Harvest Health & Recreation in a $2.1 billion all-stock deal.
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Trulieve Cannabis said it plans to acquire Harvest Health & Recreation in a $2.1 billion all-stock deal. The U.S. cannabis deal would give Florida’s dominant player a notable southwestern U.S. footprint.
Trulieve (ticker: TCNNF) and Harvest Health (HRVSF) combined would be one of the largest cannabis companies in the world, in terms of sales. Combining analyst estimates for both companies puts the estimated 2021 revenue at $1.24 billion, only slightly below consensus estimates for Curaleaf (CURLF) at $1.26 billion. Trulieve would also be the most profitable, notes CEO Kim Rivers, pointing to consensus estimates for combined 2021 adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $461 million.
Trulieve is a recent Barron’s stock pick, while Harvest Health was highlighted as one of a handful of mid-tier U.S. cannabis firms that could prove to be attractive acquisition targets. While investors chased better-known Canadian cannabis stocks, Barron’s noted U.S. operators have established profitable operations in a more attractive market.
The deal implies a roughly 34% premium to Harvest Health’s closing price from Friday, according to Eight Capital analyst Graeme Kreindler. For every Harvest Health share an investor owns, they would receive 0.117 shares of Trulieve.
Kreindler notes that the combined entity would be the leading operator in Florida and Arizona, with significant footprints in Pennsylvania and Maryland. Combined, the companies have operations in 11 states. Harvest will hold a special meeting during the third quarter to approve the dal.
Stifel GMP analyst Andrew Partheniou called it the largest transaction in U.S. cannabis history in a note on Monday. He notes that Trulieve has historically traded at a discount to peers since its major focus has been Florida. After the merger, investors should re-evaluate that discount, according to Partheniou.
Trulieve stock was down 2.3% to $40 Monday morning, while Harvest Health shares were up 17% to $4.18.
Harvest Health also reported first-quarter results on Monday. The company’s sales of $88.8 million were in line with consensus expectations, while adjusted Ebitda of $23.7 million crushed expectations for $14.8 million, according to Partheniou. The company also raised its 2021 revenue target by 5% to “at least $400 million.”
Write to Connor Smith at connor.smith@barrons.com