Curaleaf CEO shares the potential of the European cannabis market with a $ 286 million acquisition of Cheddar

0
121

The US cannabis company Curaleaf agreed to acquire Emmac Life Sciences, based in London, for $ 286 million. This is the company’s first step into the burgeoning European cannabis market.

“We think while the market is just beginning to emerge, the addressable opportunity in Europe might actually be greater than the addressable opportunity in the US, and this gives us an unprecedented platform to build on,” said Joe Bayern, CEO of Curaleaf, across from Cheddar.

The cash and stock transaction is expected to close at the beginning of the second quarter of 2021.

The cannabis multistate operator Curaleaf is already well represented in the US market. Following the $ 830 million acquisition of Grassroots Cannabis, which closed in July, the company has operations in 23 states, including Arizona and New Jersey, where voters recently approved adult use legalization . The Emmac acquisition gives Curaleaf access to the expanding European medical cannabis market.

Emmac has cannabis cultivation and processing operations in Portugal and Spain – and unlike the US, where international cannabis trade is banned, in Europe it can be shipped across borders. Emmac exports to Germany, Israel, Italy and the UK and has been selected to run a medical cannabis pilot program in France. According to Boris Jordan, Executive Chairman of Curaleaf, the company plans to travel to Holland and Switzerland next year to speak to investors on the phone following the company’s latest earnings report.

“We believe that consumers in Europe have the same basic needs as consumers in the USA,” said FC Bayern.

However, gambling in new markets carries a risk. Canadian cannabis producer Canopy Growth withdrew its operations in Africa and South America, and Aurora Cannabis cited the slow adoption of the European market as partly to blame for its decision to close offices in Portugal, Spain and Italy in July, Bloomberg BNN reported.

“Of course there is a risk with new investments, but we believe that we will minimize this risk by using the know-how we have built in the US. We’re really taking the same model that we built in the US and just killing it on the European market, ”said FC Bayern.

Eight Capital’s Graeme Kreindler wrote in a note that Curaleaf’s deal has more long-term growth potential than some of the previous European investments by Canadian cannabis companies.

“The acquisition is a reminder that the global cannabis market is still relatively untapped, and those with a track record of balancing early investment with prudent capital allocation and scaling are generally overwhelmingly rewarded,” he wrote. “Unlike Canadian LPs [limited partnerships]We see this acquisition of CURA as an acquisition that has invested heavily in the European market in previous years in order to achieve higher growth in the short term and longer-term potential in terms of CURA’s general growth prospects. ”

Many in the industry, including Bavaria and Jordan, believe that the European cannabis market will one day overshadow North American markets, in part because the continent’s population is more than twice that of the US. However, it will be years before Europe reaches this potential. According to Marijuana Business Daily, medical cannabis sales in Europe were $ 273 million in 2019. The market research company Brightfield Group forecast a value of the European cannabis market of around 359 million US dollars for 2020. Cannabis sales in the U.S. market were more than $ 17.5 billion in 2020, up from $ 12.1 billion in 2019, according to BDSA. Curaleaf also reported its fourth quarter profit on Tuesday after the bell. The cannabis company reported sales of $ 230.3 million, missing analysts’ expectations but surpassing adjusted EBITDA of approximately $ 53.8 million. The company also reported losses of $ 35.3 million compared to losses of $ 26.6 million in the year-ago quarter.

Bayern attributed the loss in sales to supply chain disruptions and a market slowdown in the fourth quarter as the COVID-19 pandemic rose.