Why Is Cresco Labs (CRLBF) Stock in the Spotlight Today?

Cannabis wholesaler Cresco Labs (OTCMKTS:CRLBF) agreed to acquire its peer, Columbia Care (OTCMKTS:CCHWF), for about $2 billion. In early trading, CRLBF stock fell 5%, while CCHWF stock was flat.

marijuana stocks Hand gently holding rich soil for his marijuana plants
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So what else do you need to know?

Both companies are based in the United States, as Cresco’s headquarters are in Chicago, while Columbia Care is based in New York.

According to Cresco, this acquisition will make it a major player in the cannabis space. When the deal closes, it will have “the largest pro-forma revenue in cannabis today at over $1.4 billion.” Moreover, in the wake of the transaction, Cresco will have more than 130 stores in 18 markets, giving it the second-most outlets in the U.S. cannabis sector. Its presence will reach approximately 55% of the U.S. population.

What Happened With CRLBF Stock Today

There is even more to like. Cresco said that last quarter, had the companies already merged, it would have reported wholesale revenue of $120 million. That would be the largest such figure in the industry, it says.

Under the terms of the deal between Cresco and Columbia, the owners of Columbia’s shares will receive 0.5579 shares in Cresco Labs for each share of Columbia stock they own. Following the transaction, the owners of Columbia’s shares will control about 35% of the merged company.

Why It Matters

The acquisition is one of the largest merger and acquisition deals ever made in the cannabis sector. Cresco CEO Charles Bachtell said:

“This acquisition brings together two of the leading operators in the industry, pairing a leading footprint with proven operational, brand and competitive excellence. The combination is highly complementary and provides unmatched scale, depth, diversification and long-term growth.”

Cresco also announced its fourth-quarter results today. Last quarter, its sales jumped 34% year over year, reaching an all-time high of $218 million. Its Q4 EBITDA, excluding certain items, jumped 90% YOY to $57 million, and its same-store sales soared 28% YOY. Finally, Cresco’s cash flow from operations came in at a record $38 million.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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