Two Bay Area pot retailers fell under Canadian ownership Monday, highlighting the financial edge Canada has gained in the marijuana industry since it became the first major economy to fully legalize cannabis in October.
Oakland’s Harborside, one of the largest dispensaries in the nation with some 100,000 clients, effected a complex deal with Toronto’s Lineage Grow Co. that allows Harborside to take the smaller company’s listing on the Canadian Securities Exchange, which has become a favored home for U.S. marijuana businesses.
Separately, the Apothecarium of San Francisco, which operates three dispensaries in the city and one in Las Vegas, agreed to sell itself for $118 million in cash and stock to TerrAscend, a Toronto cannabis producer licensed in Canada and some U.S. states.
The deal shows the dichotomy North American cannabis businesses find themselves in. Legal in Canada, the industry is flush with capital, while in the U.S., where marijuana is still an illegal drug on the federal level, cannabis sellers pay state taxes in cash as they struggle to get basic banking services.
Just two and a half years ago, Harborside ducked federal prosecution that aimed to shut down its operations. In 2016, Californians voted to allow the sale of recreational marijuana despite the federal ban.
While Harborside and Lineage have signed a definitive merger agreement, the deal is still subject to regulatory approval, the companies said. Harborside, which did not respond to requests for comment, also has a dispensary in San Jose.
The Apothecarium deal includes its retail shops in the Castro, Marina and South of Market neighborhoods, as well as a cannabis production facility and retail storefront in Nevada and Valhalla Confections, an edibles manufacturing business formed in 2014 by the Apothecarium’s owners.
“I never conceived of such an investment and exit when we started the company. This industry has changed by leaps and bounds,” said Apothecarium CEO Ryan Hudson. He started the company in 2011 with three cousins and two family friends. This was his seventh business venture after six failed startups in the tech world, he said.
The Apothecarium offers hundreds of cannabis products, including local flowers and concentrates, chocolate truffle edibles, and coffees and teas. The dispensary had $45 million in revenue in 2018.
Hudson said the Apothecarium would continue to run under current management and retain its name, subject to local approvals. Approximately 200 employees will be given stock options in the new parent company, he said.
“We’re not planning to going anywhere,” Hudson said. “Customer education and patient focus will remain our core goals and (TerrAscend wants) us to do more of that. We’re happy we found a partner we trust.”