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Harvest Health & Recreation Buys Pennsylvania Cultivation Facility for $25.5 Million

By Eric Volkman - Mar 27, 2020 at 5:49PM

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The deal is the culmination of a long and tangled courtship between the company and peer CannaPharmacy.

The onslaught of the SARS-CoV-2 coronavirus isn't stopping acquisitive cannabis company Harvest Health & Recreation (HRVSF) from completing a new asset buy. The company announced Friday that it has closed a deal to acquire Franklin Labs from its owner, privately held CannaPharmacy. The price is roughly $25.5 million, which is to be paid with $15.5 million in cash plus a $10 million promissory note.

Franklin Labs operates a growth, manufacturing, and processing facility located in Reading, Pennsylvania. With its new complex, Harvest aims to start expanding the cultivation part of it later this year.

U.S. currency in the shape of a marijuana leaf.

Image source: Getty Images.

The facility will support Harvest's retail operations in the state. Currently, the company owns five dispensaries there, two of which are located in Reading. The others are situated in Johnstown, Scranton, and the state capital Harrisburg. Harvest and its affiliates are licensed to operate up to 15 Pennsylvania dispensaries in total.

The Franklin Labs deal has a rather bumpy history. In April 2019, Harvest agreed to buy CannaPharmacy outright. This would have given Harvest CannaPharmacy's right to own or operate a set of cannabis licenses in New Jersey, Maryland, Pennsylvania, and Delaware. The following November, however, the deal was scaled back to involve only Franklin Labs.

In its press release heralding the closing of the Franklin Labs purchase, Harvest said it "helps to alleviate supply constraints in a fast-growing market, while contributing to improved financial performance." It did not specify to what degree the new asset might aid its finances.

The deal didn't move the needle on the marijuana company's stock. Falling more precipitously than key stock market indexes on Friday, Harvest's shares ended the day more than 5% lower.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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