22:20:59 EDT Thu 28 Mar 2024
Enter Symbol
or Name
USA
CA



Harvest Health & Recreation Inc
Symbol HARV
Shares Issued 67,580,634
Close 2019-04-23 C$ 13.51
Market Cap C$ 913,014,365
Recent Sedar Documents

Harvest Health & Recreation firms up Verano buy

2019-04-23 18:38 ET - News Release

Mr. Steve White reports

HARVEST HEALTH & RECREATION SIGNS DEFINITIVE AGREEMENT TO ACQUIRE VERANO HOLDINGS TO BECOME ONE OF THE MOST DIVERSIFIED U.S. CANNABIS OPERATORS

Harvest Health & Recreation Inc. would become the largest multistate operator (MSO) in the United States following closing of a definitive agreement signed on April 22, 2019, to acquire Verano Holdings LLC, as previously announced by press release dated March 11, 2019. Verano is one of the largest privately held, multistate, vertically integrated licensed operators of cannabis facilities with an extensive portfolio of premium branded products.

Transaction overview

Pursuant to the terms of the business combination agreement, securityholders of Harvest and Verano will become securityholders in the combined company, which will carry on the business of Harvest and Verano. The transaction will be carried out by way of a plan of arrangement under the Business Corporations Act (British Columbia) whereby, among other things: (i) Harvest shareholders will exchange their shares in Harvest for equivalent securities in the resulting issuer on a one-for-one basis, and (ii) Verano securityholders will be issued a combination of subordinate voting shares and multiple voting shares in the capital of the resulting issuer in connection with the indirect exchange of their securities in Verano. The all-stock transaction has an implied total acquisition cost of approximately $850-million (U.S.), based on a Harvest share price of $8.79 (Canadian). In addition, the transaction will include completion of various Verano pipeline acquisitions, with a combined value of approximately $36-million (U.S.), and additional pipeline acquisitions that are in negotiations and that may include certain entities that are ancillary to Harvest's business, payable in shares of the resulting issuer.

In connection with the transaction, an application will be made to list the resulting issuer's subordinate voting shares for trading on the Canadian Securities Exchange.

The transaction will require, among other approvals, the approval of at least 66-2/3rds per cent of the votes cast by each class of Harvest shareholders at a special meeting expected to take place in June, 2019. The board of directors of Harvest has unanimously approved the transaction and will recommend that Harvest shareholders vote in favour of the transaction at the Harvest meeting.

The transaction is subject to, among other conditions, court approval, CSE approval, receipt of applicable shareholder approvals at the Harvest meeting, certain additional regulatory approvals customary for a transaction of this nature, and the satisfaction or waiver of all closing conditions.

The business combination agreement includes covenants typical of transactions of this nature, including with respect to non-solicitation, a right granted to each party to match superior proposals and provisions entitling each party to a fiduciary out. In addition, Harvest and Verano have each agreed to pay a termination fee to the other party upon the occurrence of certain events.

Full details of the transaction will be included in the management information circular of Harvest describing the matters to be considered at the Harvest meeting, which will be made available on SEDAR under the issuer profiles of Harvest at SEDAR.

Eight Capital acted as Harvest's financial adviser, and Infor Financial Inc. acted as financial adviser to the special committee of Harvest's board of directors. In addition, Eight Capital and Infor Financial have each provided an opinion to the board of directors of Harvest that, as of the date of the opinion and subject to the assumptions, limitations and qualifications on which the opinions were based, the consideration being paid by Harvest in connection with the transaction is fair, from a financial point of view, to Harvest.

The transaction is expected to offer synergies related to enhanced scale of the combined operations, which transaction, upon completion, is expected to make Harvest the largest MSO, as measured by facilities allowed, state footprint, revenue and permitted facilities in today's market -- despite the potential growth based on changes in U.S. federal laws. Following closing, Harvest will be able to operate in up to 200-plus facilities in 17 U.S. states and territories, including 123 retail dispensaries. Combining Verano and Harvest, Harvest is one of the few U.S. multistate operators with a record of operational profitability.

"Expanding our national footprint is paramount at Harvest and allows us to continue on the path to profitable growth for shareholders," said Jason Vedadi, executive chairman of Harvest. "This accretive transaction will improve our position by strategically expanding our operating base to realize the benefits of scale. From day one, both companies focused on consistent revenue and profit growth. We are excited to bring Verano's premium brands, depth of management and sound operations into Harvest."

Steve White, chief executive officer of Harvest, added: "We have long viewed the acquisition of Verano as a strategically, financially and operationally compelling opportunity that brings immediate value to shareholders of both companies. The acquisition provides us with the combined skills and capacity to bring the promise of cannabis's future value to the masses. The talent we've assembled with significant, relevant real-world experience provides Harvest a deep bench from which to scale responsibly, and to ensure we meet the expectations of a seamless, value-creating integration, we've engaged one of the leading global management consulting firms in the world to assist us."

On the completion of the transaction, Harvest will gain:

  • Operations in 11 states and territories, including seven cultivation licences and 37 retail licenses;
  • Vertically integrated, cash flow positive operations that generated net revenue exceeding $31-million in 2018;
  • Proven executive team with retail, manufacturing, branding, logistics, regulatory and operational experience and 300 employees;
  • Ethanol extraction technology at pharmaceutical-grade levels, providing new market opportunities for cannabis biotech, food and beverage verticals;
  • Premium portfolio of proprietary strains and precisely dosed products, crafted by artisan chefs, that rounds out Harvest's product offering with 150 SKUs spanning medical and adult use;
  • Total cultivation expansion capacity of 900,000 square feet in Illinois, Nevada and Maryland;
  • Operations and/or management of nine Zen Leaf dispensaries;
  • A newly developed headquarters in Chicago that will serve as a new hub of operations for Harvest's operations east of the Mississippi River.

"Our teams are architects of change in the cannabis industry. Both are geographically complementary and focused on operational excellence and bringing safe, high-quality, precisely dosed artisanal cannabis options to our customers," said George Archos, Verano co-founder and chief executive officer. "We are crafting a brighter way forward together to grow Harvest's leadership and profile in key markets and deliver significant value to customers and shareholders."

Acquisitions lay foundation for expanding wholesale network

"Verano's acquisition brings strong leadership to Harvest's expanding wholesale network," continued Mr. White. "Verano's wholesale product strategy and expertise has enabled penetration of 80 per cent of the dispensaries in each state in which it operates. By combining that with our recently announced planned acquisitions of Falcon (Feb. 14, 2019) and CannaPharmacy (April 9, 2019), and their strong distribution networks, Harvest is now well positioned to build several national cannabis brands that will meet the full spectrum of consumer and patient needs."

About Harvest Health & Recreation Inc.

Harvest Health & Recreation is one of the first consistently profitable, vertically integrated cannabis companies with one of the largest footprints in the United States. Harvest's complete vertical solution includes industry-leading cultivation, manufacturing and retail facilities, construction, real estate, technology, and operational and brand-building expertise -- leveraging in-house legal, human resources and marketing teams, along with proven experts in writing and winning state-based applications. The company has more than 750 employees with proven experience, expertise and knowledge of in-house best practices that are drawn upon whenever Harvest enters new markets. Harvest's executive team is composed of leaders in finance, compliance, real estate and operations.

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