Cresco Closes Acquisition of Origin House, Adding Leading California Wholesale Distribution and Cultivation Operations to Its Strategic National Footprint
- Establishes Cresco as one of the largest wholesale distributors in California.
- Expected to enable Cresco to continue developing its house of brands in one of the largest and most influential legal cannabis markets in the world.
- Combines two industry-leading cultivation, branding and distribution teams.
CHICAGO, January 08, 2020–(BUSINESS WIRE)–Cresco Labs Inc. (CSE: CL, OTCQX: CRLBF) (“Cresco” or the “Company”), one of the largest vertically integrated multistate cannabis operators in the United States, announced today that it has closed the previously announced acquisition of CannaRoyalty Corp. d/b/a Origin House (“Origin House”) (CSE: OH, OTCQX: ORHOF) by way of a plan of arrangement (the “Arrangement”). With the closing of the Arrangement, Cresco has significantly increased its footprint and accelerated its entry into the California market.
“This is a transformational deal for Cresco and represents the culmination of the better part of a year’s work for both the Cresco and Origin House teams,” said Charlie Bachtell, Cresco’s CEO and Co-founder.
With the closing of this transaction, Cresco is in a position to accelerate its entry into one of the largest legal cannabis markets in the world, while adding valuable expertise in wholesale distribution and brand development, which we expect will drive significant value for all of our shareholders as we scale across the country in the coming years.
Charlie Bachtell, Cresco’s CEO and Co-founder
We also see meaningful synergies across our national footprint through the addition of Origin House’s ultra-premium indoor cultivation team, which we expect will assist us in our goal to consistently outperform the market on yield and quality metrics.
Mr. Bachtell continued, “In an industry that is in flux, Cresco is one of the most fundamentally sound and best-positioned multi-state cannabis operators in the U.S. The Company has built an engine that is designed to execute operationally, develop leading brands and get them into the hands of consumers to drive growth and value across all three horizons – short, medium and long term.”
Cresco’s focus on the middle two verticals of the value chain – brands and wholesale distribution – as the key to creating long-term shareholder value, is aligned with the philosophy we had at Origin House.
Marc Lustig, Chairman and CEO of Origin House
Speaking as one of the largest former shareholders of Origin House and now an enthusiastic and significant Cresco shareholder, I am looking forward to the opportunity for this combined team to create value for all of our shareholders.
Pursuant to the Arrangement, Cresco will appoint Marc Lustig, Chairman and CEO of Origin House, to the Cresco board of directors, following receipt of certain U.S. regulatory approvals.
The acquisition of Origin House makes Cresco a leading wholesale distributor in California, selling into over 575 dispensaries, representing approximately 65% of California’s storefront dispensaries. Origin House’s Continuum distribution platform distributes 13 third party brands, including Kings Garden.
Origin House’s 92,000 square feet of ultra-premium indoor cultivation and production facilities is expected to allow Cresco to expand its offering of Cresco branded products across California rapidly; growing market share, generating brand equity, and driving shareholder value.
Transaction Details
Pursuant to the terms of the Arrangement, holders of common shares of Origin House (“Origin House Common Shares”) received 0.7031 (the “Exchange Ratio”) subordinate voting shares of Cresco (“Cresco Shares”) for each Origin House Common Share held, holders of class A compressed shares of Origin House (“Origin House Compressed Shares”) ultimately received 70.31 Cresco Shares for each Origin House Compressed Share held (the “Consideration”). In total, Cresco acquired 94,558,120 Origin House Common Shares (on an as converted basis) in exchange for 66,483,798 Cresco Shares.
In connection with the closing of the Arrangement, the remaining portion of the approximately CAD$39.7 million of subscription proceeds raised in connection with the financing announced on November 26, 2019 have now been released from escrow, resulting in the issuance of 9,713,839 Origin House Common Shares under the financing. A further 3,692,639 Origin House Common Shares were issued to certain service providers, vendors and contracting parties of Origin House. All such Origin House Common Shares were exchanged, pursuant to the Arrangement, at the Exchange Ratio, for 0.7031 Cresco Shares and are not subject to any statutory hold period.
It is anticipated that the Origin House Common Shares will be delisted from the Canadian Securities Exchange (“CSE”) as of the close of trading on January 9, 2020, and Origin House intends to submit an application to the applicable securities regulators to cease to be a reporting issuer and to terminate its public reporting obligations.
Pursuant to the letter of transmittal mailed to shareholders of Origin House as part of the materials in connection with the special meeting of shareholders of Origin House held on December 31, 2019 (the “Meeting”), in order to receive the portion of the Consideration to which they are entitled, registered holders of Origin House Shares are required to deposit their share certificate(s) representing Origin House Shares, together with a duly completed letter of transmittal, with Odyssey Trust Company, the depositary under the Arrangement. Shareholders whose Origin House Shares are registered in the name of a broker, dealer, bank, trust company or other nominee must contact their nominee to deposit their Origin House Shares.
Further information about the Arrangement is set forth in the materials prepared by Origin House in respect of the Meeting which were mailed to Origin House shareholders and filed under Origin House’s profile on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.
ABOUT CRESCO LABS:
Cresco is one of the largest vertically-integrated multi-state cannabis operators in the United States. Cresco is built to become the most important company in the cannabis industry by combining highly strategic geographic footprint with one of the leading distribution platforms in North America. Employing a consumer-packaged goods (“CPG”) approach to cannabis, Cresco’s house of brands is designed to meet the needs of all consumer segments and includes some of the most recognized and trusted national brands including Cresco, Remedi and Mindy’s, a line of edibles created by James Beard Award-winning chef Mindy Segal. Sunnyside*, Cresco’s national dispensary brand, is a wellness focused retailer designed to build trust, education and convenience for both existing and new cannabis consumers. Recognizing that the cannabis industry is poised to become one of the leading job creators in the country, Cresco has launched the industry’s first national comprehensive Social Equity and Educational Development (SEED) initiative designed to ensure that all members of society have the skills, knowledge and opportunity to work in and own businesses in the cannabis industry. Learn more about Cresco at www.crescolabs.com.
ABOUT ORIGIN HOUSE:
Origin House is a growing cannabis brands and distribution company operating across key markets in the U.S. and Canada, with a strategic focus on becoming a preeminent global house of cannabis brands. Origin House’s brand development platform is operated out of six licensed facilities located across California, and provides distribution, manufacturing, cultivation and marketing services for its brand partners. Origin House is actively developing infrastructure to support the proliferation of its brands internationally, initially through its acquisition of Canadian retailer 180 Smoke. Origin House’s shares trade on the CSE under the symbol “OH” and on the OTCQX under the symbol “ORHOF”. Origin House is the registered business name of CannaRoyalty Corp. For more information, visit www.originhouse.com.
