(Adds CFO comments, deal details)
By Debroop Roy
May 1 (Reuters) - Curaleaf Holdings Inc said on Wednesday it would buy Cura Partners Inc’s Select brand in an all-stock deal valued at C$1.27 billion ($948 million) to create the world’s largest cannabis company by revenue.
Shares of Curaleaf surged 15 percent to C$15.35 as the deal is expected to expand the company’s presence on the U.S. West coast, while adding Select-branded weed oil to its portfolio of vape oils, topical lotions, capsules, mints and lozenges.
The pot industry has seen a string of deals in recent months as companies look to boost the scale of their operations in the United States, with the recreational use of cannabis now legal in 10 states and the District of Columbia and medical marijuana legal in 23 states.
“This acquisition firmly establishes us not only as the largest U.S. cannabis company by market cap but also as the largest cannabis company globally on a revenue basis,” Curaleaf Executive Chairman Boris Jordan said on a conference call.
Based on 2018 numbers, the combined entity’s revenue would have been about $205 million, nearly double that of its closest competitor Trulieve Cannabis Corp.
Curaleaf said it expects “significant” cost savings, with input costs more than halving and processing costs falling by about a quarter, and would give it access to Select’s operations in Oregon, Nevada, California and Arizona.
“Everyone is trying to keep up with the rapid pace of consolidation and regulatory change,” Jordan said, referring to the pace of deal-making in the sector.
In April, Cresco Labs said it would buy pot distributor Origin House for about C$1.1 billion, while Harvest Health & Recreation Inc acquired Verano Holdings LLC for about $850 million.
Under the terms of Wednesday’s deal, Curaleaf will buy outstanding equity of Cura Partners in exchange for 95.6 million of its shares. Cura Partners will own 16 percent of the merged entity.
Cameron Forni, who created Select brand in 2015, will join Curaleaf as president of Select, after the deal closes.
GMP Securities L.P. and Eight Capital were co-financial advisers to Curaleaf, while Canaccord Genuity Corp and Bayline Capital Partners were financial advisers to Cura Partners.
$1 = 1.3396 Canadian dollars Reporting by Debroop Roy in Bengaluru; Writing by Arathy S Nair; Editing by James Emmanuel and Anil D'Silva