US-based Curaleaf Holdings has signed a definitive agreement to acquire Eureka Investment Partners, LLC.
The transaction is valued at $30.5 million, of which $10 million is to be paid in cash and $20.5 million in Curaleaf stock, with a potential additional consideration to be paid if certain financial targets are exceeded. The deal is subject to customary closing conditions and is expected to close in March 2019.
Based in Monterey County, California, Eureka operates a cultivation facility in the Salinas Valley and is developing three dispensaries across the state.
The addition of Eureka’s cultivation platform will provide Curaleaf access to California’s wholesale market through an existing 110,000 sq. ft. greenhouse facility in Salinas, California, with the potential to expand up to 270,000 sq. ft. that could generate over 50,000 pounds of dry flower per year at full scale.
During the fourth quarter of 2018, Eureka harvested over 2,500 pounds of flower and distributed pre-rolls and dry flower under the brand Monterey Kush. The planned launch of Eureka’s three premium locations in Long Beach, Salinas and Monterey County, expected to begin operations in the second half of 2019, will launch Curaleaf’s retail network into California.
“The Eureka transaction represents a significant milestone for Curaleaf, enabling us to enter the highly attractive California market with a cultivation platform that we intend to use for state-wide product distribution,” said Joseph Lusardi, CEO of Curaleaf.
“The Eureka transaction represents a significant milestone for Curaleaf, enabling us to enter the highly attractive California market with a cultivation platform that we intend to use for state-wide product distribution.”
Joseph Lusardi, Curaleaf
“The planned launch of three dispensaries is a platform investment for Curaleaf’s retail expansion strategy to eventually cover the state, which is the largest market for cannabis consumption in the country. With established vertically integrated operations, Curaleaf is ready to capitalize on the considerable market opportunity in California.”
In October 2018, Curaleaf received a conditional use permit and business license from the City of Davis, California for cannabis manufacturing and state-wide distribution. A conditional use permit and business license for mobile delivery was issued by the City of Davis in November 2018. As of January 1, 2019, Curaleaf’s operations have been licensed by the State of California and the City of Davis, with plans to commence operations in 2019.
The acquisition of Eureka’s facilities in Salinas allows for seamless integration with Curaleaf’s manufacturing facility in Davis, enabling the Company to manage its supply chain efficiently through vertically integrated cultivation, production, distribution and dispensing in California. Curaleaf’s Davis facility positions Eureka to maximize the value of its harvest, reducing waste and converting trim into oil and other consumables that can be utilized for distribution across the retail footprint.
Curaleaf has the largest footprint of single-branded retail stores in the U.S. and is executing on its strategy of building a national brand in highly populated states. Curaleaf will continue to explore opportunities to open additional locations throughout the state of California in 2019.
“The ability to enter the largest cannabis market in the U.S. at an attractive multiple reflects Curaleaf’s continued strategic and prudent use of capital,” added CFO Neil Davidson.Cannabis Business Worldwide