A Chicago-based cannabis-producing firm, Cresco Labs Inc., will acquire all of the issued and outstanding shares of Origin House, a Canadian headquartered firm that is a top cannabis distributor in California. The all-stock transaction is valued at roughly $823 million, making it the largest-ever public company acquisition in the U.S. cannabis sector. Both companies are listed on the Canadian CSE and OTCQX.

According to the press release, Origin House shareholders will receive about 0.84 subordinate voting shares of Cresco Labs Inc. The combined company will have licenses for up to 51 retail locations in California, Florida, Michigan and Illinois, and roughly 1.5 million square feet of cultivation across 11 states, and its brands will be sold in roughly 725 dispensaries throughout the United States.

The transaction is one of several cross-border deals in the past six months with valuations of nearly one billion dollars.

The deal is expected to become final in June 2019, subject to regulatory approvals, as well as the approval of two-thirds of Origin House shareholders. Approval of Cresco Labs shareholders is not required.

Commentary / Jodi Avergun

Following close on the heels of an IPO by cannabis merchandise company Greenlane, and the $850 million acquisition last month by Chicago-based distributor Harvest Health of all of the stock of California-based Verano, the cannabis M and A space is strengthening and becoming more mainstream by the month.

Cresco's acquisition of Origin House was described by the Cresco CEO during an investor call as "the first transaction of this kind in the U.S. market and a strategic acquisition based on channel perspective and channel opportunity." It is also the first deal to use data analytics to drive the acquisition price and value proposition.

The combination of technology and a widespread and sophisticated delivery system is what ultimately made the transaction compelling to investors - just as it would in other industries. In fact, the parallels to more traditional industries are striking, down to the companies' legal and banking advisors. As more traditional players and market participants openly transact in this space, can rescheduling or legalization be far behind?

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