Verano to Acquire Virginia License, Assets From The Cannabist Co. for $90M

Chicago-based Verano Holdings is poised to enter the Virginia cannabis market through a $90-million deal with fellow multistate operator The Cannabist Co., the companies announced July 29. Verano also plans to acquire Arizona assets from The Cannabist Co. for $15 million.

Through the agreement, Verano will acquire a vertically integrated medical cannabis license in Virginia for a total consideration of $20 million in cash, $40 million in Class A subordinate voting shares, and a $30 million promissory note at closing.

This license agreement includes a cultivation and production facility and six dispensaries in the commonwealth’s Health Service Area (HSA) V, home to nearly 2 million of Virginia’s roughly 8.7 million residents in the eastern part of the state. There are five HSAs in Virginia, and medical cannabis license holders have exclusivity in each HSA.

Specifically, Verano plans to acquire HSA V dispensaries in Hampton, Norfolk, Portsmouth, Suffolk, Virginia Beach and Williamsburg through the agreement with The Cannabist Co.

In addition to Virginia, Verano will acquire one cultivation facility, one production facility and two dispensaries from The Cannabist Co. in Arizona in a $15 million all-cash deal. The retail facilities are located in Tempe and Prescott.

Upon closing, this deal will expand Verano’s Arizona footprint to 90,000 square feet across three facilities. The company will also have eight total dispensaries in the Grand Canyon State.

“Today’s agreement further diversifies Verano’s portfolio, which, since the company’s inception, has remained focused on expanding our business into limited-license markets to scale both our wholesale and retail operations,” Verano Chairman and CEO George Archos said in a public statement.

“This opportunity greatly increases Verano’s growth trajectory as we gain access to the coveted market of Virginia ahead of an adult-use program and deepens our footprint in Arizona,” he said. “With Virginia, we will be in a prime position to once again take advantage of the extraordinary growth that is expected to come with an adult-use program launch.”

Under former Democratic Gov. Ralph Northam, Virginia legalized the possession of up to 1 ounce of cannabis for adults 21 and older, as well as the home cultivation of up to four plants per household, provisions that became effective in July 2021.

Earlier this year, the commonwealth’s Democratic-controlled General Assembly passed legislation to establish a commercialized adult-use marketplace. Republican Gov. Glenn Youngkin vetoed that cannabis “sales bill” on March 28, stating concerns over health and safety.

Although Virginia’s HSA medical cannabis licensees have exclusive brick-and-mortar retail opportunities in each region—with the current max of six dispensaries allowed per HSA—these license holders are permitted to provide home delivery throughout the commonwealth as well as participate in wholesale opportunities within other HSAs.

This limited-license structure in Virginia also represents market opportunities for Green Thumb Industries, which operates six RISE dispensaries in HSA III, and Jushi Holdings, which operates six Beyond / Hello dispensaries in HSA II.

Although Verano plans to be the newest player in the commonwealth’s medical cannabis program, this isn’t the company’s first attempt to enter the Virginia market.

In July 2022, Verano entered into a $5-million cash agreement option to acquire MedMen subsidiary PharmaCann Virginia LLC, whose HSA I license was tied up in litigation. In April 2023, PharmaCann Virginia LLC lost an appeal for its HSA I license in the Virginia Court of Appeals, dealing another win to the state’s Board of Pharmacy over a conditional license it rescinded nearly three years prior.

The Virginia Cannabis Control Authority opened an application process to re-award the HSA I license earlier this year but did not meet its June deadline to issue the license to a new recipient. 

RELATED: Verano Bets $5 Million to Enter Virginia Medical Market

Through the Verano-Cannabist Co. acquisition agreement announced this week, The Cannabist Co. will retain its HSA IV license in the Richmond region, where the company operates a roughly 80,000-square-foot cultivation and manufacturing facility and five dispensary locations, with plans to open a sixth. The Cannabist Co., formerly Columbia Care, took control of the HSA IV license following its 2021 acquisition of Green Leaf Medical.

The Cannabist Co.’s agreement with Verano comes six weeks after it announced its exit from the Florida medical cannabis market—including divesting three cultivation facilities and 14 dispensaries—following a $19 million loss in 2023.

“We are pleased to have reached an agreement and look forward to welcoming Verano to the robust Virginia market,” The Cannabist Co. CEO David Hart said in a July 29 press release. “As mentioned in previous announcements, we are continuing to optimize our footprint as we target building a better business, which includes deleveraging our balance sheet. We will retain our five existing retail locations in the Richmond, Va., area, with one additional location in development, as well as our cultivation and manufacturing facility.

“We are so proud of what our Eastern Virginia and Arizona teams have accomplished and look forward to seeing the Verano team support their continued successes.”

Following the closure of the Virginia and Arizona agreements, Verano’s geographical footprint will expand to 14 states, including 15 cultivation and production facilities and 150 dispensaries.