By Shariq Khan
(Reuters) – U.S. cannabis producer Cresco Labs Inc is in advanced talks to buy rival Columbia Care Inc for around $2 billion, three people familiar with the matter said on Tuesday.
If a deal is finalised it would be one of the largest in the U.S. cannabis industry to date. The industry, still in its infancy, continues to operate in a regulatory environment defined by a patchwork of laws that vary from state to state.
A deal could be announced as soon as Wednesday, the sources said. Exact terms of the deal could not be learnt.
The people cautioned that talks could still fall apart and highlighted that the companies have overlapping footprints in multiple states, including in the key New York market, and could require significant divestitures – a possible hurdle in reaching an agreement.
The sources requested anonymity as the discussions were confidential.
Cresco Labs and Columbia Care did not respond to multiple requests for comment.
Cannabis sales in the United States have been booming and are forecast to reach $46 billion by 2026, according to industry research firm BDSA, as states like New York and New Jersey open up.
Still, margins and profits remain thin and analysts and investors have called for consolidation to improve profitability by finding savings in scale.
The AdvisorShares Pure U.S. Cannabis exchange-traded fund has lost 19% of its value so far this year.
Columbia Care stock has risen about 9% this year but it is down almost 70% since it started trading in 2019. Cresco Labs shares have slumped 63% from a 2021 peak.
Both companies are listed in Canada and trade over-the-counter in the United States as marijuana remains illegal at the federal level, and the two large U.S. stock exchanges cannot allow companies that grow or sell the plant to list their shares.
Cresco is scheduled to report its fourth-quarter financials on Wednesday, while Columbia Care last week postponed its earnings to Thursday.
(Reporting by Shariq Khan in Bengaluru; Editing by Kenneth Maxwell)