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Offer of the week / In partnership with Viridian Capital Advisors
On July 12, Verano Holdings Corp. closed (CSE: VRNO; OTCQX: VRNOF) to acquire all outstanding and issued interests in Agri-Kind, Pennsylvania, Growers and Processors, and Agronomed Holdings.
The total of $ 147 million included:
- $ 66 million in cash.
- $ 49.5 million in Verano common stock.
- $ 31.5 million potential earnout.
Verano is aggressively buying market share in Pennsylvania, with five of its 10 acquisitions and 94% of the $ 507 million total.
The vertical integration through the addition of cultivation is an integral part of the Agri-Kind / Agronomed deal, which may justify the premium price paid by Verano.
The transaction value was approximately $ 2,371 per square foot, which is significantly higher than similar acquisitions of grow / manufacturing facilities in Pennsylvania, as shown in the graphic below.
The five most comparable deals in the state traded averaging $ 1,380 and a median of $ 545 per square foot, which is significantly lower than what Verano paid for.
Pennsylvania is a desirable market for operators from multiple states in 2021.
The Viridian Deal Tracker recorded 10 transactions totaling $ 691 million for grow and retail businesses in Pennsylvania. In 2020 there are six transactions with a total value of 282 million US dollars.
Verano is leading the 2021 acquisition trend in the marijuana sector, but other MSOs such as Trulieve Cannabis, Jushi Holdings, and Ayr Wellness have shown strong interest in the state.
Errors, omissions plague filings of cannabis securities
US multi-state marijuana operators must step up their game when it comes to disclosures they file with securities regulators.
A recent MJBizDaily investigation into CEO compensation packages for the roughly 15 leading public MSOs found several errors and omissions in the disclosures.
In at least two cases, companies made simple math errors that were hundreds of thousands of dollars below board pay.
In another instance, a company missed a $ 529,000 bonus that the CEO earned over the year. In addition, several MSOs have disclosed options and stock awards in a separate table on a separate page and without estimates.
U.S. securities regulators require large companies to put everything in one table, including:
- Value of the share awards granted.
- Value of other incentives.
- Value of other compensation, such as personal security or life insurance packages.
“Investors want everything on one page, all the numbers,” said Fred Whittlesey, cannabis compensation expert, founder of the Seattle-based Compensation Venture Group.
“If a company is not prepared to offer all stakeholders full transparency about executive compensation, we have to question the reasons for this.”
Whittlesey said there is some leeway for smaller businesses in the United States. An MSO filing in Canada privately defended its conduct, saying it was following requirements from Canadian securities regulators.
Canadian regulators are not as strict as those in the US, Whittlesey said, and there are some gray areas.
Still, marijuana executives have been talking about being more professional and applying the same strict financial standards as other U.S. industries for years.
In turn, additional transparency will help build investor confidence.
– Jeff Smith