Debra Borchardt
Florida-based Trulieve Cannabis Corp. (OTCQX: TCNNF) is making a big move in Pennsylvania with the acquisition of Keystone Shops from Anna Holdings LLC in a deal valued at $60 million. Keystone has locations in Philadelphia, Devon, and King of Prussia. The deal consists of $40 million in Trulieve stock and $20 million in cash.
Kim Rivers, Trulieve CEO said in a statement, “Trulieve continues to bolster our national expansion efforts with acquisitions that both complement our current portfolio and strengthen our long-term strategy. The Keystone Shops are located in a densely populated area of Pennsylvania and with their staff’s knowledgeable and customer-centric approach to patients, these dispensaries are valuable additions to our Pennsylvania portfolio.”
The acquisition will add three fully operational dispensaries in the Philadelphia area to Trulieve’s retail footprint of 83 dispensaries nationally. It will also expand Trulieve’s footprint in Pennsylvania, the fifth most populated and limited-license state, adding to Trulieve’s existing operations in Pennsylvania. At this time, the state is only legal for medical marijuana, while the neighboring state of New Jersey will begin selling adult-use cannabis as early as this year. It is anticipated that once New Jersey begins these sales, it could steall sales from Pennsylvania residents.
Just a few weeks ago Trulieve reported annual revenue of $521.5 million for 2020, representing year-over-year growth of 106%. For the full year, the company reported a net income of $63.0 million resulting in full-year earnings per share of $0.53 on a fully diluted basis.
Pennsylvania Holdings
In November, Trulieve completed the acquisition of PurePenn LLC and Pioneer Leasing & Consulting LLC, which the company refers to collectively as PurePenn, and (ii) Keystone Relief Centers, LLC, which is known as Solevo Wellness. PurePenn operates cannabis cultivation and manufacturing facilities in the Pittsburgh, Pennsylvania area and currently wholesales the PurePenn and Moxie brands to 100% of the operating dispensaries in Pennsylvania. As of December 31, 2020, PurePenn has 35,000 square feet of cultivation space, which the company said it plans to expand to 90,000 square feet in the first half of 2021. Solevo Wellness operates three medical marijuana dispensaries with approximately 16,000 square feet of retail space, each with six points of sale, in the Pittsburgh, Pennsylvania area.
Pennsylvania Market
Pennsylvania licenses three different types of marijuana organizations: dispensaries, grower-processors, and clinical registrants. A clinical registrant license allows the license holder to grow, process, and dispense medical marijuana in conjunction with an accredited medical school. The Commonwealth’s Medical Marijuana Act authorized the Department of Health to issue up to 25 grower-processor licenses and 50 dispensary licenses. The Department of Health is authorized to license up to eight clinical registrants and has licensed seven thus far. The Department of Health has the discretion to expand the number of dispensary and grower-processor permits as necessary.
No person may own more than five individual dispensary permits. A permit may be used to dispense medical marijuana at up to three locations as approved by the Department. Pennsylvania issued 27 dispensary licenses during Phase I of its medical marijuana program. Applicants were allowed to apply to operate up to three dispensary locations in a given region. Ten licensees obtained approval to open three locations, five licensees obtained approval to open two locations, and the remaining twelve licensees gained approval to open one location.
During Phase II, Pennsylvania issued 23 dispensary licenses, with four licensees obtaining approval to open two locations and fifteen obtaining approval to open one location (none obtained approval to open three locations). Notable competitors include Columbia Care, GTI, Curaleaf and Harvest who controls 12 dispensaries. According to Arcview/BDS Analytics, the Pennsylvania market is expected to grow to $770 million by the end of 2025, a CAGR of 10.6%, from 2019.
