Vireo Growth has been on an M&A binge lately, recently closing deals with Schwazze, PharmaCann, Eaze and Hawthorne while announcing additional agreements with Fluent and Glass House. But even with its seemingly insatiable appetite for consolidation, Vireo is still not interested in Texas. At least for now.
Within Vireo’s deal for Fluent is an agreement to sell its subsidiary, Cansortium Texas, to Legacy Therapeutics. That includes Cansortium Texas’s license, cultivation, manufacturing and delivery business in Schulenburg, Texas, as well as its Houston retail operations.
Speaking with investors this week, Vireo CEO John Mazarakis said the regulatory environment in Texas just doesn’t align with his operational philosophy right now.
“Those of you who know me, know that I despise capex, especially when there’s meaningful regulatory uncertainty. I like to invest in projects where the capex investment will be cash-on-cash returned in one year, so that’s 100 percent cash-on-cash return,” he said during Tuesday’s earnings call. “Texas is a very large state, and it requires a huge commitment that I’m not really ready to make right now. And I feel there will be other opportunities in the future to go back to Texas and capitalize on other people’s mistakes.”
Vireo's reluctance to jump into the emerging Texas medical cannabis market comes as other MSOs are facing uncertainty in the state. Cresco Labs earlier this week had its conditional medical cannabis license rescinded by the state.
Even without Fluent’s Texas operations in the asset mix, Mazarakis said his company is now the fourth largest U.S. cannabis operator in terms in revenue.
Vireo last month closed its deal to acquire cannabis cultivation unit Hawthorne from Scotts Miracle-Gro after recently buying retail assets from Eaze, PharmaCann and Schwazze. Those transactions expanded Vireo’s retail presence in Colorado to 55 stores.
Vireo also recently announced an agreement with Glass House, one of the largest cannabis growers in the U.S., to combine their California retail operations into a new joint venture.
Glass House currently operates 11 California retail locations, and Vireo operates 12 dispensaries and home delivery operations recently acquired from Eaze. The combined network will be supported by a preferential supply agreement with Glass House. Cory Azzalino, Vireo's president of California and former CEO of Eaze, has been tapped to run the joint venture, where he will oversee operations and lead the platform's retail acquisition and expansion strategy.
