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Trulieve Cannabis Corp. said on Monday it will buy medical pot producer Harvest Health & Recreation Inc. for US$2.1-billion, creating the largest U.S. cannabis company by revenue.

The prospect of U.S. reforms gives companies a chance to further capitalize on consumer appetite for pot products, which has risen since the onset of the COVID-19 pandemic, leading to a jump in cannabis deal making in recent months.

The deal gives Trulieve a foothold in Florida, Pennsylvania and Maryland, and in core markets including Arizona, where the recreational adult use of cannabis was recently legalized.

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Harvest Health’s shares rose 15 per cent in afternoon trading to $5, while Trulieve fell more than 4 per cent to $47.62 on the all-stock deal.

“I think this is the beginning of a trend we are likely to see in the industry,” said Robert Leidy, founder at investment manager Teneo Capital Management.

“[The deal] puts pressure on companies like Curaleaf, Green Thumb, and Cresco to think about how they want to build out their footprint,” he said.

The combined business will have a retail network of 126 dispensaries across 11 states in the U.S., with a total capacity of 3.1 million square feet, Trulieve said.

“We see years of M&A and expect Merger Mondays, like today’s announcement of Trulieve and Harvest combining, to be a continued theme for years to come. It won’t be long until we are talking about companies doing US$2 billion a year in sales,” said Morgan Paxhia, co-founder of investment fund Poseidon.

Trulieve and Harvest’s 2021 revenue estimate adds up to around US$1.2-billion, more than double that of Canadian producer Canopy Growth Corp., currently the world’s most valued pot stock.

“The deal is accretive to Trulieve and I think it will be one of, if not the most profitable MSOs (multi-state operators),” said Michael Murphy, portfolio manager at Teneo Capital.

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“That is certainly worth the premium being paid right now.”

Harvest shareholders will get 0.1170 of a Trulieve voting share for each Harvest subordinate voting share held, a 34-per-cent premium to the stock’s last close.

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