Cresco Labs, one of the largest vertically integrated multi-state cannabis operators in the United States, has reached an agreement with Verdant Creations LLC and its affiliates in a deal that will give Cresco the option to purchase four additional Ohio dispensaries currently operated by Verdant. Completion of the transaction is subject to approval by the Ohio Board of Pharmacy. Upon closing, Cresco would have a total of five dispensaries in Ohio – the maximum allowed by the state.
“Upon completion of this transaction and completing the final phase of buildout at our cultivation facility, we expect to drive increased revenue growth and operating leverage in this limited license state,” said Charlie Bachtell, Cresco Labs CEO and co-founder, in a statement “We continue to value vertical integration and retail to create leverage for our wholesale and brand building while providing front-line feedback directly from our consumer base. Ohio is the seventh most populated state in the country, now has over 100,000 registered patients and experienced over 30% growth in average weekly sales from February to April. With our experience in Illinois and Pennsylvania, we think Ohio is on its way to joining these states as one of the strongest performing regulated cannabis programs in the country.”
Verdant currently operates dispensaries in Cincinnati, Chillicothe, Marion, Newark, and Columbus. The Columbus location is not part of the transaction.
The deal is consistent with Cresco’s stated strategy of going deeper in key states. Cresco has 25,000 square feet of cultivation, currently undergoing upgrades, which are fully funded by a sale-and-leaseback agreement with Industrial Properties REIT. The four additional dispensaries would increase Cresco’s vertical integration in Ohio and could act as crucial customer touchpoints to increase recognition of Cresco’s portfolio of brands. Cresco products are currently offered in nearly 60% of dispensaries in Ohio.
Cresco has agreed to provide certain consulting services and financing to Verdant for the development and operation of the dispensaries in consideration of Verdant’s grant to Cresco of an option to acquire the dispensaries when permissible under Ohio regulations. Cresco’s financial obligations in the transaction are substantially fulfilled and the consideration payable by Cresco upon exercise of the option for each dispensary consists of $375,000 in cash and $500,000 of Cresco subordinate voting shares. Subject to approval by the Ohio Board of Pharmacy, Cresco expects the transaction to close in the fourth quarter of 2020.
