Trulieve (CNSX: TRUL) announced yesterday (September 16) after market that they are entering the Pennsylvania cannabis market by acquiring both growing and retail assets, in conjunction with a capital raise of $100.5 million (at $24.50/share). The share offering price was at a 10% discount to the closing market price ($26.98/share).
Trulieve has agreed to acquire cultivator and producer PurePenn LLC and Pioneer Leasing & Consulting LLC (collectively “PurePenn”) as well as dispensary operator Keystone Relief Centers LLC, doing business as Solevo Wellness (“Solevo”). Key highlights:
- PurePenn was acquired for an upfront payment of $46 million, comprised of $27 million in Trulieve subordinate voting shares and $19 million in cash, plus a potential earn-out payment of up to approximately $60 million shares (based on milestones).
- Solevo was acquired for an upfront purchase price of US$20 million, comprised of $10 million in cash and $10 million in Trulieve Shares, plus a potential earn-out payment of up to approximately $15 million shares (based on milestones).
In the press release Kim Rivers (CEO) stated:
“We believe Pennsylvania is one of the most attractive cannabis markets in the United States and these acquisitions align with our focus on expanding within the northeast. The combination of these companies, coupled with Trulieve’s supply chain expertise, customer and brand-centric approach, and ability to profitably grow will propel us into a strong leadership position in the state.”
The medical market size in Pennsylvania is estimated to be US$420 million in 2019 and is anticipated to grow to US$575M by the end of 2020, according to BDS Analytics.
Trulieve is arguably the best cannabis operator in the US, delivering the best returns on equity (ROE) in the industry (see graph below vs. US peers). Expansion in the east coast is very much on strategy and the Pennsylvania medical market is a great fit.
US Multi-State Operator Returns on Equity
Investors are getting a business that returns significantly above average equity returns for a valuation multiple that is in-line with peers (that have negative ROEs), Trulieve trades at 3.4x 2021 sales.
US MSO Price-to-Sales Multiples
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