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Over the past 12 months, there’s been a marked change in cannabis deal flow, with U.S. multi-state operators (MSOs) listing on the Canadian Securities Exchange and raising astonishing amounts of money on Bay Street. The MSOs are now following a playbook previously mastered by the large publicly traded Canadian LPs: the rapid scale-up through all-stock acquisitions.

Harvest Health & Recreation, Inc.’s US$850-million all-stock acquisition of privately-held Verano Holdings, LLC is perhaps the most striking example yet, and follows on the heels of another MSO mega-merger between iAnthus Capital Holdings, Inc. and MPX Bioceutical Corp.

Together, Arizona-based Harvest and Illinois-based Verano will operate 30 dispensaries, eight cultivation facilities and seven manufacturing facilities when the deal closes. The companies are planning to ramp up quickly and expect to have 70 dispensaries, 13 cultivation facilities and 13 manufacturing facilities up and running by the end of the year.

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Verano is a new company, pieced together from a number of U.S. assets, including Illinois-based Atraxia and Nevada-based Lone Mountain Partners and Naturex (dba Zen Leaf). The businesses were combined last October following a $120-million investment led by SOL Global Investments Corp. (formerly Scythian Biosciences), and Serruya Private Equity.

Verano currently runs nine dispensaries in Illinois, Nevada, Oklahoma and Maryland, with further dispensaries under construction in other states. It has cultivation assets in Illinois, Maryland, Nevada and California.

Harvest’s dispensary footprint includes Arizona, California, Florida, Maryland and Pennsylvania, with additional dispensaries being built in Massachusetts, Michigan, North Dakota and Ohio.

"Harvest started as a licence-winning retail-focused company. We have systematized cultivation and scaled it in the recent year. Along with that, we also acquired Evolab and Falcon Brands out of California which has significant market share in the wholesale environment,” said Jason Vedadi, Harvest’s executive chairman, on an investor call on Monday.

"The Verano acquisition extends Harvest's reach into a number of states, Illinois, New Jersey, Michigan, Oklahoma, and Puerto Rico, many of which we have talked about wanting to get into previously. It supplements our operations and our licenses in California, Nevada, Massachusetts, Ohio, Maryland and Arkansas. Our reach now goes into 16 states and territories. But the number of states is less important, what is more significant is the depth of reach within those states," said Steve White, CEO of Harvest.

Harvest raised more than US$218-million in a private placement in November, concurrently with its listing on the Canadian Securities Exchange. Together with the US$120-million raised by Verano, the companies “have enough capital to execute through our 2020 cash flow models,” Mr. Vedadi said.

Harvest shares were up 10.6 per cent on Monday. SOL Global’s stock likewise popped 10.7 per cent.

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