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Cresco Labs To Acquire Origin House For About C$1.1 Bln

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U.S. cannabis company Cresco Labs Inc. (CRLBF) will acquire cannabis distributor CannaRoyalty Corp. d/b/a Origin House (ORHOF) in a deal valued at about C$1.1 billion, the two companies said Monday.

The transaction, which represents the largest public company acquisition in the history of the U.S. cannabis industry, has been unanimously approved by the board of directors of both companies.

The deal will accelerate Cresco Labs' entrance into the California market with the addition of Origin House's distribution platform. Origin House delivers over 50 cannabis brands to more than 500 dispensaries in California, representing about 60 percent market penetration.

According to Arcview Market Research/BDS Analytics, California, the world's largest regulated cannabis market, is projected to be a $7.7 billion cannabis market in 2022.

The transaction will be effected by way of a plan of arrangement under the laws of the Province of Ontario. Under the terms of the deal, Chicago-based Cresco Labs will acquire all of the issued and outstanding shares of Origin House.

Each shareholder of Origin House will receive 0.8428 Cresco Labs shares for each Origin House share, or C$12.68 per Origin House share, based on the closing price of Cresco Labs shares on March 29, 2019, the last trading day prior to the announcement of the transaction.

Origin House shareholders will hold about 20 percent of the issued and outstanding Cresco Labs shares on a pro forma, fully-diluted and as converted basis.

Certain directors, officers and other significant shareholders of Origin House have agreed to vote in favor of the transaction. They have also agreed to deposit their resulting Cresco Labs shares into escrow and be released over a period of nine months following closing of the transaction.

The deal requires the approval of two-thirds of the votes cast by shareholders of Origin House at a special meeting expected to be held in June 2019, while approval of Cresco Labs shareholders is not required. The transaction is expected to be completed by the end of June 2019.

Following the closing of this acquisition, Cresco brands will be in over 725 dispensaries across the country.

Upon the completion of the transaction, Marc Lustig, Chairman and CEO of Origin House, will be appointed to the executive management team of Cresco Labs and will also serve as a member of the company's Board of Directors.

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