The world's largest marijuana retailer, Massachusetts-based Curaleaf Holdings, has signed a deal to acquire one of Europe's biggest cannabis cultivators, in a move that banks on the liberalisation of political attitudes towards the plant.
Marijuana. Credit: Brett Levin / Flickr
Credit: Brett Levin / Flickr
Curaleaf, which operates more than 100 cannabis outlets in 23 states across the US, said that the cash-and-share deal worth up to $342 million (€287.5 million) to acquire London-based Emmac Life Sciences, would give it an advantage in a market that many consider has potential for rapid growth in the near future.
"The consumer and political liberalisation trends around cannabis that are sweeping the US are also increasingly taking hold across Europe," said Curaleaf CEO, Boris Jordan.
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The deal will see Curaleaf pay an upfront amount of $285 million (€239.6 million) with a further $57 million (€47.9 million) to follow, dependent on performance.
Recreational marijuana use remains illegal in Europe though some countries have decriminalised personal possession below a certain limit. The Netherlands and Portugal are two such examples where the legislation is clear, though there are a number of others where the drug's legal status is more opaque.
For example in Germany, federal law states that a public prosecutor may drop a possession case if the defendant possessed "a small amount". However, there is no definition of what " a small amount" constitutes, leading to some more conservative states, such as Bavaria and Baden-Württemberg setting the limit at 6 grams, while more liberal Berlin allows as much as 15 grams.
In terms of medical use, the law is often clearer and many countries, like Germany and the UK have legalised marijuana use for those reasons.
Since Canada became the first major economy in the world to legalise cannabis use for any purpose, be it medical use or simply to get high, investors have been rushing into the industry.
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In the US, while the drug remains illegal on a federal level, many states such as Arizona, California and Colorado, now allow its use for both medical and recreational purposes.
Industry watchers are now hoping, as Democrats take control of the Senate, for federal decriminalisation.
"It is a question of when, not if," said Jordan, adding that many were expecting new legislation to be proposed before the end of President Biden's first term.
Antonio Costano, Emmac's CEO, described the Curaleaf deal as a "significant milestone" not just for the company but also for the cannabis industry in Europe, adding that he felt it to be three or four years behind that in North America.
"We are going to see recreational use opening up in the next few years, but in the short term medical will drive growth," he said.
Emmac produced around 10 tonnes of marijuana last year at its facilities in Portugal, which were sold for medical use in countries like Italy, Germany and the UK.
While Jordan said he anticipated the US to remain the world's largest market for the time being, he pointed out that Europe has twice the population.
"Habits in Europe for using cannabis are as good if not better than the US [and] that illicit market will eventually become legal," he said.
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Listed in Canada, Curaleaf is the world's largest provider of cannabis in terms of sales, with $653 million (€549.1 million) in revenues in 2020.
The company will soon be eclipsed by the soon-to-be merged Tilray and Aphria, with a combined $700 million in annual sales.
The recent wave of recreational liberalisation in the US has transformed Curaleaf's business model "dramatically", Jordan said. At the start of 2020, the company made around 90% of its income from medical marijuana. Now, he said, around 60% came from recreational use.
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