Cannabis company Harvest Health & Recreation Inc. (HRVSF) said Friday it has closed the acquisition of Franklin Labs, LLC, a subsidiary of CannaPharmacy, for about $25.5 million. The transaction comprises a payment of $15.5 million in cash and a $10 million promissory note.
The announcement comes just one day after Tempe, Arizona-based Harvest Health said it decided to mutually terminate its merger agreement with Verano Holdings LLC.
The acquisition of Franklin Labs by Harvest Health includes a 46,800 sq. ft. cultivation and processing facility in Reading, Pennsylvania.
Harvest Health said that pending the required approvals, it expects to expand the existing cultivation operation this year and potentially complete further expansion in the future to support market growth.
Harvest Health projects manufacturing and processing operations to commence this year during the second quarter. The Franklin Labs facility is the only cultivation facility owned by Harvest Health in Pennsylvania and is expected to supply significant product to retail dispensaries across the state.
“This accretive acquisition helps to alleviate supply constraints in a fast-growing market, while contributing to improved financial performance. This investment in Pennsylvania is an important milestone in our plan to expand operations in key states and return to profitability,” said Harvest Health CEO Steve White.
Harvest Health’s affiliated entities own and operate five retail dispensaries in Pennsylvania, comprising two in Reading, and one each in Harrisburg, Johnstown, and Scranton. These entities are permitted for up to 15 total retail locations across the state.
On Thursday, Harvest Health and privately-held Verano Holdings, LLC said they have agreed to mutually terminate their merger transaction, citing the “persistent challenges” in consummating the transaction as well as current market conditions.
The companies noted that various factors contributed significantly to the decision not to go ahead with their business combination agreement. These include prolonged obstacles in meeting state and local regulatory requirements required to transfer ownership and operational licenses, adverse capital market conditions, and a challenging environment for asset sales.
Harvest Health said a year ago, in March 2019, that it agreed to acquire Verano in an all-stock transaction for an estimated purchase price of about $850 million.
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