Verano to acquire Virginia, Arizona operations from The Cannabist Company

Verano Holdings Corp. (OTC: VRNOF) announced Monday it has entered agreements to acquire cannabis operations in Virginia and Arizona from The Cannabist Company Holdings Inc. (Cboe CA: CBST) (OTCQX: CBSTF). The move will expand Verano’s footprint into 14 states.

The deal gives Verano entrance into Virginia’s medical cannabis market ahead of the state’s planned adult-use program launch. In Arizona, where Verano already operates, the acquisition will add two dispensaries and a cultivation facility.

“This opportunity greatly increases Verano’s growth trajectory as we gain access to the coveted market of Virginia ahead of an adult-use program and deepens our footprint in Arizona,” George Archos, Verano chairman and CEO, said in a statement.

Under the agreement, Verano will acquire one cultivation and production facility and six dispensaries in Virginia for $90 million. The company will become the sole cannabis operator for Health Service Area 5 in eastern Virginia.

In Arizona, Verano will add two dispensaries and a cultivation facility for $15 million, expanding its presence to eight dispensaries and 90,000 square feet of cultivation capacity in the state.

The Cannabist, which recently announced plans to exit the Florida market, will retain some operations in Virginia, specifically in the Richmond region.

“We are continuing to optimize our footprint as we target building a better business, which includes deleveraging our balance sheet,” David Hart, CEO of The Cannabist Company, said in a statement.

The acquisitions are subject to regulatory approvals and other closing conditions.

Verano, which is based in Chicago, currently operates in 13 U.S. states with 13 production facilities and over 1 million square feet of cultivation capacity.

The deal comes as cannabis companies navigate challenging market conditions. The Cannabist Company reported a $34 million loss in the first quarter of 2024 and has been restructuring to focus on limited-license recreational markets, following its failed almost megamerger with Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) .

The Virginia acquisition will be financed through a mix of cash, stock, and debt. Verano plans to pay $20 million in cash at closing, along with $40 million in Class A subordinate voting shares. The remaining $30 million will be covered by a promissory note issued to The Cannabist Company, the company said.

For the Arizona operations, Verano will pay the $15 million in cash.

The company is particularly optimistic about the Virginia market, where it will have exclusive rights to serve nearly two million residents in Health Service Area 5. The ability to conduct home deliveries throughout the Commonwealth and engage in wholesale opportunities with other Health Service Areas could provide additional revenue streams for Verano.

However, the timeline for Virginia’s adult-use program remains uncertain, after in-fighting and scrapped deals led to the governor vetoeing a bill this summer that would’ve stood up a regulatory framework for the shift.