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Why Marijuana Stock Curaleaf Shot 11% Higher on Monday

What happened

Curaleaf Holdings (OTC: CURLF) shares rose more than 11% on Monday on news of a fresh acquisition.

The company announced that it is now the holder of the exclusive rights for the All Rebels Rockers dispensary license in Arizona, which it acquired from a Chicago-based cannabis purveyor, privately held Grassroots. Curaleaf did not specify what it paid, nor detail any of the deal's terms.

Image source: Getty Images.

So what

Curaleaf considers this a harbinger for its outright acquisition of Grassroots, one of the longer-gestating deals in the cannabis industry at the moment.

The two companies first announced their plan for a tie-up nearly a year ago. At the time, the Grassroots deal was valued at $875 million. In light of the increased struggles of marijuana companies lately, however, the price tag on the arrangement was downsized last month to approximately $700 million.

Curaleaf sounded a note of confidence in its announcement of the Arizona license acquisition. The buy "strengthens our presence in the state, which continues to be one of the largest medical cannabis markets in the country," said CEO Joseph Lusardi in a press release. "It also marks one of the final milestones before we formally close our acquisition of Grassroots."

Now what

The All Rebels Rockers deal is small potatoes compared to the rest of Grassroots, which is the real prize. Grassroots shareholders will vote on the Curaleaf acquisition this Thursday. Even though it's very likely they'll approve it, investors should nevertheless expect a "whew, that's finally over" boost to the stock afterward.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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