Cresco Labs (CRLBF 3.11%) is enlarging its footprint in an important marijuana state. The company announced Thursday that it has signed an agreement to acquire Cultivate, a vertically integrated cannabis grower and retailer.
The up-front acquisition cost for Cresco is $90 million, and it's on the hook for as much as $68 million more in earnouts. That initial $90 million is comprised of $15 million in cash and $75 million in Cresco stock.
The money assets in the deal are Cultivate's two operating dispensaries, one of which is in the central Massachusetts town of Leicester, and the other in the Boston-vicinity municipality of Framingham. A third store in Worcester, near Leicester, should open for business by the end of June.
"At the precipice of a transformational moment in U.S. cannabis, now is the time to further our leadership in the country's largest and most important markets," Cresco CEO Charles Bachtell said. "Through this acquisition, Cresco Labs will immediately vault to a top 3 share position in Massachusetts, the third $1B+ cannabis market where we've achieved this status."
Bachtell is referring to recent data indicating that marijuana sales hit $1.1 billion in the state in 2020. This indicates a market that has grown fast, as sales of recreational marijuana began there barely over two years ago.
Cresco is one of several multistate operators (MSOs) vying to be an important nationwide dispensary chain operator. This is hardly the first time it has opened its wallet to buy an asset; in January, for example, it signed a $213 million deal to buy Florida medical marijuana grower and retailer Bluma Wellness.
In midafternoon trading on Thursday, Cresco stock was up by 0.8%, in contrast to the 0.9% dip of the S&P 500.