Trulieve Cannabis buys Keystone Shops for $60 million, latest deal in Pa. land rush for weed retailers

Trulieve Cannabis Corp. became the latest out-of-state marijuana company to snap up weed retailers in Pennsylvania, with the $60 million purchase of Keystone Shops.

The move signals a bet from an increasing number of companies in the marijuana sector that Pennsylvania will follow in the footsteps of neighboring New York and New Jersey and legalize recreational use.

“Stand-alone dispensaries have become the belle of the ball,” said Steve Schain, senior counsel at cannabis law firm Hoban Law Group. Amid New Jersey and New York’s legalization of adult-use marijuana, “the writing is on the wall” in Pennsylvania, Schain said. “The land grab is underway.”

Tallahassee, Fla.-based Trulieve (OTC: TCNNF) said its purchase adds three operational dispensaries in the Philadelphia area to Trulieve’s retail footprint of 83 dispensaries nationally and expands the company’s footprint in Pennsylvania, the fifth most-populated state. Keystone operates dispensaries in Philadelphia, Devon, and King of Prussia.

Trulieve acquired the medical marijuana dispensary license of Anna Holdings, which operates as Keystone Shops. The deal, expected to close sometime in the second quarter, includes $40 million in Trulieve shares and $20 million in cash. Neither company responded to requests for further comment.

“The Keystone Shops are located in a densely populated area of Pennsylvania, and with their staff’s knowledgeable and customer-centric approach to patients, these dispensaries are valuable additions to our Pennsylvania portfolio,” Kim Rivers, Trulieve CEO, said in a statement Monday.

Trulieve entered Pennsylvania last September when it acquired two companies for a combined $66 million — McKeesport, Pa.-based cultivator and producer PurePenn as well as dispensary operator Keystone Relief Centers, which does business as Solevo Wellness in the Pittsburgh area. Trulieve also holds dispensary licenses in Florida, California, Massachusetts, Connecticut, and West Virginia.

Keystone Shops was founded by CEO Michael Badey and his father, George, in 2016, the same year Gov. Tom Wolf signed medical marijuana legislation into law.

Pennsylvania residents can be treated with medical marijuana if under a practitioner’s care for more than a dozen serious medical conditions, including ALS, autism, cancer, epilepsy, multiple sclerosis, and post-traumatic stress disorder.

With the potential for adult-use cannabis legalization on the horizon in Pennsylvania, market data provider Headset projects the market will continue to grow rapidly.

Between January 2020 and January 2021, Pennsylvania medical cannabis sales totaled $910 million — starting at $40 million in January 2020 and ending at close to $98 million in January 2021. Store count grew last year from 86 to 114 dispensaries, even during the COVID-19 pandemic.

However, passage of recreational marijuana legislation isn’t likely anytime soon under the commonwealth’s Republican-dominated legislature, which does not want to hand Wolf, a Democrat, the victory. The mergers-and-acquisitions tempo remains hot, however, in Pennsylvania.

Most recently, TerraVida Holistic Centers, a chain of medical marijuana stores based in Jenkintown, was acquired by Chicago-based Verano Holdings, in a transaction valued at about $135 million. TerraVida operates three of Pennsylvania’s top-performing dispensaries in Abington, Malvern, and Sellersville. The cash and stock deal — formally “an acquisition of equity” — includes TerraVida’s headquarters along with state-issued permits to operate three more retail storefronts in Pennsylvania.

In 2018, Keystone opened the Philadelphia region’s first medical marijuana dispensary in Devon. Keystone added another, on Henderson Road in King of Prussia. And in 2019, Keystone added a third dispensary at 300 Packer Ave. in South Philadelphia.

Keystone Shops was among the first medical marijuana dispensaries to make a sale in Southeastern Pennsylvania.