Curaleaf to Acquire Los Sueños Farms for $67M; Shares Jump 3%

Shares of Curaleaf Holdings (CURA) rose 3% Monday after the company announced it will be acquiring the Los Sueños Farms, the largest outdoor grow operation in Colorado, in a cash-and-stock deal valued at $67 million.

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The international provider of cannabis consumer products aims to become Colorado’s largest cannabis grower. This announcement complements Curaleaf’s presence in Colorado through its Select brand.

The acquisition will give Curaleaf three outdoor cannabis cultivation facilities in Puelo, Colorado, covering a total of 66 acres of cultivation capacity. The transaction also includes a 1,800 plant indoor grow as well as two retail cannabis dispensaries. Also included in the deal is the potential for $8 million in stock provided the company achieves specific operating cash flow-based targets in 2022.

Curaleaf’s Executive Chairman Boris Jordan said, “The acquisition of Los Sueños provides Curaleaf with outdoor cannabis cultivation expertise at commercial scale and establishes our foothold in the $2.2 billion Colorado market. This deal furthers our strategy of constructing low-cost supply chains that will secure healthy margins and position us for interstate commerce when it comes. Ultimately, our goal is to cultivate cannabis at less than $100 per pound, and this acquisition is a significant step in the right direction.”

CEO Joseph Bayern indicated that the Los Sueños acquisition would expand Curaleaf’s market share by adding more than 50,000 pounds per year of low-cost wholesale capacity to Curaleaf’s Colorado footprint. Curaleaf intends to double the capacity to more than 100,000 pounds. (See Curaleaf Holdings stock analysis on TipRanks)

Last week, Needham analyst Matt McGinley assigned a Buy rating on CURA with a price target of $19.75 (C$23.94) for a 34% upside potential. McGinley stated that the stock is undervalued based on his 2022 projection of 19x adjusted Ebitda and prospects for long-term growth.

The rest of the Street is bullish on CURA with a Strong Buy consensus rating, based on 9 Buys. The average analyst price target of C$28.47 implies 59.3% upside potential from current levels.