What a record $2.1 billion deal says about America's marijuana sector – Yahoo Finance

The deals in American cannabis just keep getting bigger.

Case in point: Florida-based cannabis company Trulieve (TCNNF) set a new record Monday with its $2.1 billion all-stock deal to acquire Arizona-based Harvest Health. The combination sets Trulieve up to increase its national footprint from six states to 11, and sets it up to be the most profitable multi-state operator with adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) forecasted to top $460 million on the year.

It also goes to show how much America’s largest cannabis companies are willing to pay to gain access into states that recently legalized marijuana, like Arizona, since federal laws still restrict operating across state lines. As Trulieve CEO Kim Rivers told Yahoo Finance, sometimes it can make sense to build in a new state from the ground up — but with Harvest’s lead in Arizona, which only started recreational marijuana sales in 2021—sometimes it makes more sense to buy the leader.

“In this industry, it’s important to not only ensure that you’re in the right markets and that you have the right products at the right value propositions for customers,” she said. “It’s also important that you’re proving that profitability because of the limitations that we have in this industry due to federal constraints.”

Trulieve, which has long flexed its lead over other cannabis companies when it comes to profitability, also flexed in the announcement that Harvest recently tripled profitability during their latest quarter as Arizona’s market leader. Harvest also now gives Trulieve important ground to build on with their presence in Nevada, Colorado, and Utah. It also expands the total retail footprint to 126 dispensaries. While it remains illegal for cannabis to cross state lines, Rivers says the deal allows Trulieve to establish distribution channels in key markets.

The calculus on a major deal, of course, is

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