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Curaleaf expands to Europe with $286M acquisition

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Joe Bayern, Curaleaf CEO joins the Yahoo Finance Live panel to discuss the company’s earnings and expanding its empire to Europe.

Video Transcript

ZACK GUZMAN: Welcome back to "Yahoo! Finance Live." We are watching America's largest cannabis company today moving a bit lower, giving back some of the gains it saw yesterday as it released earnings, as well as announced a rather large acquisition to catapult its business into Europe. We'll start with earnings here though since we got those. Coming in a little bit light on the top line there, revenue just over $233 million, but still up 186%. Adjusted EBITDA surpassing expectations at $53 million for the quarter.

The big news though was that $286 million cash-in stock deal to expand into Europe by acquiring European cannabis company EMMAC Life Sciences in a cash-and-stock deal. The acquisition gives Curaleaf, America's largest cannabis company, a door now into Europe. Through that acquisition, EMMAC already operating in the UK, Germany, Italy, Portugal, and Spain, that now puts Curaleaf in direct competition with a lot of those Canadian giants that had been operating in Europe, including Tilray and Aphria, who have long-touted their foothold in Portugal.

We're more on the move though. I want to bring on the CEO of Curaleaf. Here with us Joe Bayern joins us now. And Joe, it was big news to really see this come through because you guys had long talked. We talked with your executive chairman, Boris Jordan, earlier in the year about raising $300 million for what it sounded like investing in growth here in the US. So why look to Europe right now, and why this particular company?

JOE BAYERN: Yeah, I think as you said, despite some softness in the fourth quarter, we had a very positive 2020. Our total year earnings were up over 456% on adjusted EBITDA basis, and our revenue was up over 160% year over year. So we feel like we have a lot of momentum in the US, and as we think about continued growth of our business, it seemed like a natural evolution to start thinking about taking our model and deploying it across the European footprint.

We think Europe has a tremendous opportunity in the near future, and I think it was a natural time for us to think about extending our model out.

ZACK GUZMAN: Yeah, given the conversations leading up to this announcement, I'd be curious if, not mentioning Europe earlier was a bit of a smokescreen to really get people off the scent of maybe expanding into Europe. Or if it's kind of a pivot in the expectations, we've seen a lot of excitement around expectations here in the US for legalization kind of taking a backseat now currently with the administration having to deal with stimulus to get through here. So I mean, has your timeline changed maybe, or are you still actively looking at investing more stateside?

JOE BAYERN: Well, we'll continue to build stateside and build out our footprint in the US. As all good businesses, we think across multiple time horizons, and we still have a very, very specific agenda about building out our national footprint. We've made tremendous progress in 2020. We've grown from 14 to 23 States, from 50 dispensaries to over 101 today and servicing over 85,000 unique patients per month to 170,000 unique patients per month.

And we'll continue to build on building a national distribution platform for our brands, but we believe that we also have to start thinking about the next horizon. And like the phenomenon in the US cannabis industry, we're seeing an acceleration of acceptance across mainstream consumers. We believe that the same phenomenon is going to happen in Europe. And so we felt it was appropriate for us to be able to go in and think about building a foundation.

Broadly speaking, we think where Europe is today, where the US industry was three years ago, and where Curaleaf was three years ago, building out a platform to be able to create a national branding strategy. We see the same factors playing out in Europe. And I think as we said in the US, COVID is accelerating some of that, as people look to build jobs, build tax revenue, we think that same phenomenon is going to take place in Europe. So it was the right time for us. It's not revolution, it's evolution of our strategy, and we believe now is the time to start investing.

ZACK GUZMAN: Well, let's dig into one of those States also capitalizing on what you're talking about there in tax revenues and trying to get their legal cannabis market off the ground. We chatted with New Jersey Governor, Phil Murphy, about those plans to see when the timeline is going to kick in for companies like yours to start selling in that State. I just want to play what he told us and then get your reaction. Here's what he had to say.

PHIL MURPHY: My guess is that I'm going to say, Zack, six-ish months from now, the current medical dispensaries, assuming they can testify that they have enough supply for their medical customers, will begin to be able to participate in the adult recreational piece of this. It'll take a while longer for the retail industry from the ground up to get stood up, but again, it's coming.

ZACK GUZMAN: So six-ish months in New Jersey would put us around September. Curious to get your take on that timeline and how Curaleaf thinks its position to take on the competition in New Jersey as we see that market take off.

JOE BAYERN: I think that's very consistent to the way we've been talking about the timing rolling out in New Jersey. As you probably know, we've been preparing for this for some time. We are the number one player in New Jersey today. We are more than doubling our capacity, but preparing for adult use. That should be coming online by the end of the first half. We're also expanding our footprint in the number of dispensaries we have in New Jersey.

So we've been preparing for adult use in New Jersey, and I think we are well prepared. And we are excited about the timing of-- we've said sometime around the fourth quarter to be able to servicing adult use customers there. So I think it's very consistent with our thought process, and we're prepared to help grow that industry.

ZACK GUZMAN: Lastly, I'm just trying to do some quick math here and looking at the $300 million you guys raised earlier in the year in equity and debt and the size of this deal, $286 million. It seems like it wouldn't leave that much, maybe for more investment in the US. I mean, are you thinking what's the strategy around maybe raising capital? We know that it's a unique position for a lot of cannabis companies here in the US to tap new money, so how are you looking at that, perhaps, for the rest of the year?

JOE BAYERN: Yeah, it's interesting. I mean, I think one of the benefits of our European investment is, of course, it's legal in Europe, so the cost of capital is significantly lower than it is in the US. We have ample capital, as we've talked about, to not only build out our platform, but accelerate some of the growth initiatives from 2022 and bring those into 2021 on the US basis.

And we're planning to do a capital raise in Europe around European business. We want to be ambitious about building out our platform, but we could raise capital at a much lower cost of capital in Europe, so we plan to do that both through equity and through debt.

ZACK GUZMAN: All right, Joe Bayern, Curaleaf CEO, appreciate you coming on here to chat. Exciting times as your company expands. Thanks again for taking the time.