Cresco Labs enters C$1.1bn deal to acquire Origin House

Cresco Labs Inc. has entered into a definitive agreement to acquire all of the issued and outstanding shares of California-based Origin House.

The transaction represents a total consideration of approximately C$1.1 billion on a fully-diluted basis, or C$12.68 per Origin House Share, based on the Exchange Ratio and the closing price of Cresco Labs Shares on March 29, 2019.

Chicago-based Cresco therefore says the deal represents ‘the largest public company acquisition in the history of the U.S. cannabis industry’.

It adds: ‘The combined entity will be: one of the largest vertically-integrated multi-state cannabis operators in the United States; a leading North American cannabis company, by footprint; and one of the largest cannabis brand distributors.’

Origin House, the registered business name of CannaRoyalty Corp, is based in California, where it delivers over 130 branded cannabis products from 50+ brands to the majority of licensed dispensaries.

Origin House’s brand development platform is operated out of five licensed facilities located across California, and provides distribution, manufacturing, cultivation and marketing services for its brand partners.

Its shares trade on the CSE under the symbol “OH” and on the OTCQX under the symbol “ORHOF”. Origin House is

The combining entities say their merger will result in the ‘premier distribution company serving California, the largest cannabis market in the world’. The deal accelerates Cresco Labs’ entrance into the California market with the addition of Origin House’s vast distribution platform.

“The acquisition of Origin House is another example of our focused and disciplined approach to creating a meaningful presence in key cannabis markets through excellence in brand development and distribution,” said Cresco Labs CEO and Co-founder Charlie Bachtell.

“It establishes Cresco Labs as the leading multi-state operator with one of the largest distribution platforms in California, which is projected to be a $7.7 billion cannabis market in 2022 by Arcview Market Research/BDS Analytics. Having a similar priority on consumers and consumer brands with the expertise of executives from the largest wine and liquor distribution company in the United States, the team at Origin House has established the premier cannabis distribution company in the largest cannabis market in the world.

“It’s an incredible platform for Cresco in California and the distribution infrastructure will provide a valuable framework to leverage as we scale our platforms in other states. Congratulations to Marc and the team at Origin House – through strategic M&A and purposeful investments, they’ve built something very special.”

“The acquisition of Origin House is another example of our focused and disciplined approach to creating a meaningful presence in key cannabis markets through excellence in brand development and distribution.”

Charlie Bachtell, Cresco Labs (pictured)

Bachtell continued, “Following the closing of this acquisition, Cresco brands will be in over 725 dispensaries across the country, giving us the largest and most strategic distribution footprint of any cannabis company in the United States. This significantly accelerates our efforts to build the first national house of brands with broad and deep positions in the largest cannabis markets in the country. Cresco will have industry-leading brand development and distribution capabilities, which we believe will result in significant value creation for consumers and our shareholders alike as the market for medical-use and regulated adult-use cannabis continues to grow at a rapid pace.”

“We are excited to welcome the Origin House team to the Cresco family,” said Cresco Labs President and Co-founder Joe Caltabiano. “With the addition of Origin House and its vast distribution network in California, we will have access to incredibly valuable real-time market data and insight into consumer buying patterns that will inform our product development strategies and reinforce our brand strength. In addition to their brand building and distribution expertise, Origin House has a very experienced M&A, corporate development and capital markets team that will be extremely valuable as we continue to expand and add scale through additional transactions.

“With respect to the capital markets impact, with the equity issued through this transaction, we expect to have substantially more shares in our float, which we believe will provide ample liquidity for larger institutional investors looking to deploy capital into the cannabis space. We expect that our larger scale and improved liquidity following this acquisition will positively impact our ability to attract a larger universe of potential investors and reduce our cost of capital in the future.”

Marc Lustig, Chairman and CEO of Origin House commented, “From an Origin House perspective, this transaction is directly aligned with our strategy to build a leading portfolio of cannabis brands in California and to rapidly and accretively take those brands to the rest of the U.S. market, as well as the Canadian market. By partnering with one of the largest and most innovative U.S. multi-state operators in existence today, Origin House will supercharge its growth and be in a position to offer its brand partners access to 10 additional states, with licenses and supporting infrastructure already in place.

“Cresco shares Origin House’s resolute focus on the customer as the catalyst for all brand and business development efforts. This Transaction is not the first opportunity we have reviewed, but it has received the unanimous support of our board and large shareholders because we are confident that together we will be in a position to truly change the face of the global cannabis industry while continuing to create significant value for the shareholders of both companies.”

Under the terms of the Agreement, Cresco Labs will acquire all of the issued and outstanding Origin House Shares, with each holder of Origin House common shares receiving 0.8428 Cresco Labs Shares for each Origin House Share (and each holder of an Origin House proportionate voting share receiving 84.28 Cresco Labs Shares for each proportionate voting share held), which implies a price per Origin House Share of C$12.68 (on an as converted basis), representing a total consideration of approximately C$1.1 billion (on a fully-diluted).

After giving effect to the Transaction, Origin House Shareholders will hold approximately 20% ownership in the pro forma entity (on a pro forma fully-diluted and as converted basis).Cannabis Business Worldwide

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