Cresco Labs Inc (CSE:CL) (OTCQX:CRLBF) has today announced the $282.5 million USD acquisition of Tryke Companies, causing Cresco stock to drop 8.3%.
Investors in Cresco Stock Not Feeling Bullish
Tryke Companies, a medical marijuana firm based in Nevada, has considerable assets in Arizona, Utah, and its home state, which will allow Cresco to establish a market-leading position in those areas. The deal will see Cresco Labs take control of six dispensaries, including Tryke’s flagship location Reef Dispensary located adjacent to the Las Vegas Strip, which has produced over $65 million USD in revenue since 2015. Investors in Cresco shares clearly aren’t feeling as bullish about the deal, however, as seen by the declining value today.
The breakdown of the deal will see Cresco pay $252.5 million USD for operating assets, plus an additional $30 million USD for real estate assets. The total consideration will consist of approximately $227 million USD in Cresco shares and $55 million USD in the form of cash. Cresco will now take control of four Nevada and two Arizona retail locations, cultivation of a 12-acre plot, and 27,000 square feet of cultivation and processing capacity in Phoenix, Arizona.
Acquired Asset Portfolio on the Light Side
Given the rather sizeable cost of the deal, it would appear that the asset portfolio acquired by the company is a bit light and perhaps this could be the main reason for the drop in Cresco stock today. However, it is worth noting that the assets are in key locations and will serve to increase Cresco’s market share significantly. The Las Vegas location is the closest dispensary to the Las Vegas strip and is one of the highest-grossing dispensaries in the world.
The purchase of Tryke Companies by Cresco Labs is anticipated to be finalized by mid-2020, after receiving state approval as well as passing antitrust laws, while the associated financing is anticipated to close by September 24, 2019. Cresco stock is currently valued at $7.25, up 7.72% in the year to date, having posted impressive results throughout the year.
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