Cresco Labs

Cresco Labs Purchases Origin House With Tiny Premium Becoming One of the Largest MSOs

Today Cresco Labs announced they are acquiring Origin House for C$1.1B which works out to $12.68 per share. Not exactly a giant premium, but the combined entity will create arguably the largest cannabis company in the United States.

Origin House is a top distributor in California. The company offers a full suite of support services to transform cannabis products into strong California consumer brands. Origin House delivers over 50+ cannabis brands to more than 500 dispensaries in California, representing approximately 60% market penetration.

Shortly after the news release, Deep Dive correspondents reached out to two shareholders who had the following comments, “I’d say thanks if there were any premium…..unreal” and from another shareholder “F***** b****** premium”…

This is somewhat reminiscent of the the MPX/iAnthus merger where shareholders only received a 30% premium. Given this is an all-stock transaction, shareholders should do well from the synergies provided. The California market is very competitive and fragmented, for Cresco Labs to pick up a strong California operator to add to their large East Coast footprint, they now have most the majority of the US cannabis market covered.

Cresco Labs recently made noise when they announced the purchase of VidaCann in a $120 million cash and stock deal, one of the last remaining operators in the state of Florida. Which effectively gives Cresco Labs a footprint on par with any operator in the country. This is likely kicking off a competition to the top. In such a nascent industry, it is very difficult to question who is deploying their capital wisely, but in terms of national footprint, this acquisition makes sense for both shareholders. 

This represents over 100x trailing sedar based sales, but of course that would be an unfair metric. Or using the last quarters run rate, approximately 44x sales. And of course, the most recent sedar data is rarely reflective of a growing companies current run rate.

And one final interesting thought is that synergies will be picked up with the ability for Cresco to roll out the Origin House brands and services over all their nascent operations.


Information for this analysis was found via Sedar, Origin House and Cresco Labs. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.

Video Articles

Why Copper Juniors Could Explode After This Trade War Move | Christian Easterday – Hot Chili

Silver Is Rarer Than Gold, And the Market’s Waking Up | Shawn Khunkhun – Dolly Varden Silver

Gold Will Hit North of $4,000: Who’s Actually Producing? | Shane Williams – West Red Lake

Recommended

ESGold Sees ANT Survey Reveal Vertically Continuous System To 1,200 Metres Depth

First Majestic Produces 7.9 Silver Equivalent Ounces In Q2, Lifts Production Guidance

Related News

Origin House Enters into Exclusive Agreement with Kings Garden

Origin House (CSE: OH), a company focusing on cannabis distribution in the Canadian and US...

Monday, December 30, 2019, 10:55:43 AM

Cresco Labs: Canaccord Drops Price Target To $16

On November 11th, Cresco Labs (CSE: CL) reported its third-quarter financial results. The company reported...

Saturday, November 13, 2021, 01:04:00 PM

Cresco Labs Reports 2021 Financials: $821.7 Million In Revenue, $296.8 Million Net Loss

Cresco Labs (CSE: CL) released its Q4 and full-year 2021 financials, highlighting what it deems a...

Wednesday, March 23, 2022, 10:32:00 AM

Cresco Labs: Analysts Raise Targets Following Massachusetts Acquisition

On March 18th, Cresco Labs (CSE: CL) announced the acquisition of Cultivate, a Massachusetts-based vertically...

Tuesday, March 23, 2021, 11:53:00 AM

The Influence of Branding Within the US Cannabis Sector

Brands dominate in the US. Thus, its only natural that a heavy branding strategy has...

Wednesday, April 17, 2019, 12:30:08 PM