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Cresco Labs to acquire Tryke for Arizona, Nevada expansion

Cresco Labs Inc. said it was acquiring Tryke Cos. to expand its presence in the states of Nevada and Arizona.

The Chicago-based cannabis company will pay $252.5 million for the business, made up of $227.5 million in Cresco shares and $55 million in cash. It will pay a further $30 million for Tryke's real estate assets. The acquisition is expected to close in the first half of 2020 subject to approval from Nevada and Arizona state authorities plus federal antitrust clearance.

Canaccord Genuity Corp., Wilmer Cutler Pickering Hale and Dorr LLP are advising Tryke on the deal, while Cresco Labs is being advised by Cormark Securities Inc. and Bennett Jones.

In addition to assuming ownership of six cannabis dispensaries in Nevada and Arizona, Cresco said it will also receive expanded cultivation and process capacity in Las Vegas and Phoenix and entry into the Utah market.

Tryke generated $70.4 million in 2018 revenues and booked $24.6 million in EBITDA the same year — making it one of the highest-grossing and most profitable private cannabis companies in the U.S. market, Cresco said in a statement.

Separately, Cresco said it was looking to raise C$73.5 million from an offering of units.

The company plans to sell 7,350,000 units at C$10 each to a group of investment dealers led by Canaccord. The investors will have an option to buy up to an additional 1,102,500 units from the company.

Each unit will be made up of a subordinate voting share of the company and half of a purchase warrant. Each whole warrant can be exchanged for a subordinate voting share of Cresco for C$12.50 each.

The company intends to use the proceeds to fund business development and meet working capital requirements.

The offering is expected to close about Sept. 24 and will take place in each of the provinces of Canada except for Québec.