Harvest Health & Recreation (OTC:HRVSF) will not be going ahead with a pending acquisition after all. The company announced on Thursday that it and Verano Holdings have mutually agreed to cancel their planned tie-up.
"Prolonged obstacles in meeting requirements for state and local regulatory authorities needed to transfer ownership and operational licenses, adverse capital market conditions, a challenging environment for asset sales, all contributed significantly to the decision not to move forward with the pending acquisition," said Harvest in its press release on the matter.
Harvest added that the outbreak of the SARS-CoV-2 coronavirus, which is badly affecting the global economy, was also a factor in the decision to retreat from the purchase.
Under the deal originally agreed to in April 2019, Harvest would purchase privately held Verano, a vertically integrated multistate operator (MSO), in an all-stock transaction valued at $850 million. At the time, it was the priciest acquisition agreement in the U.S. marijuana industry's brief history.
Harvest took pains to say that the cancellation will not require any breakup fees or other payments between the two companies.
Last year produced a wave of acquisitions in the cannabis industry, as those companies with robust cash hoards shopped around in an effort to build scale and prominence. But even before the coronavirus pandemic, marijuana companies had been posting losses on a regular basis, a trend that had led many to put the brakes on asset purchases.
Investors registered their disappointment with the cancellation of the Verano deal on Thursday; Harvest's stock was down by almost 8% in mid-afternoon trading on a bullish day for the broader stock market.