Florida-based cannabis company Trulieve has entered into an agreement to acquire fellow multistate operator Harvest Health and Recreation for a whopping $2.1 billion. The transaction is the biggest ever in U.S. cannabis, according to the companies.
"Today's announcement is the largest and most exciting acquisition so far in our industry, creating the most profitable public multi-state operator. Importantly, our companies share similar customer values with a focus on going deep in core markets," Trulieve CEO Kim Rivers said in a statement. 
If the transaction closes, it would almost double Trulieve's national footprint to 11 states up from six and would create a combined network of 126 dispensaries and 22 cultivation facilities. The acquisition grants Trulieve entry into key markets like Maryland and Arizona, where voters approved adult-use legalization in November.
Cowen analysts noted access to the Southwest as the highlight of the transaction.
"The key benefit of this transaction is TRUL's entry into the SW hub, especially AZ. HARV is the market leader in AZ, operating 15 dispensaries with licenses for four additional locations and 329K sq. ft. of cultivation and production across five facilities," analysts wrote in a note.
Long focused on its home state of Florida, Trulieve has branched out in recent years with an expansion plan centered on building geographic hubs across the country. Trulieve said the Harvest acquisition will bolster that strategy by increasing expansion in the Northeast and Southeast hubs and establishing a hub in the Southwest.
"Harvest provides us with an immediate and significant presence in new and established markets and accelerates our entry into the adult-use space in Arizona," Rivers said in a statement.
The deal values Harvest at about $4.79 per share — a 34 percent premium to its May 7 closing price. Harvest shareholders will receive 0.1170 of a Trulieve share for each Harvest share, per the terms of the transaction. 
The announcement comes just over a year after Harvest Health and Recreation terminated its proposed $850 million acquisition of Verano Holdings, citing obstacles to meeting regulatory requirements and challenging market conditions, among other things. 
Challenging market conditions had a dampening effect on M&A in the first half of 2020, but there are indicators that appetite is returning amid momentum toward legalization and cannabis reform at the state and federal level in the United States. Viridian Capital Advisors, a market research firm that tracks cannabis transactions, wrote in a mid-April report that the first half of 2021 could break records for cannabis M&A if the pace continues as expected.
"We expect the M&A activity to continue to accelerate. New [recreational] states including New York, New Jersey, Virginia, and New Mexico are likely to spur significant new activity and states with prospects for becoming adult use like Pennsylvania should continue to experience strong M&A activity as well," the firm wrote.
Morgan Paxhia, co-founder and managing partner of cannabis investment fund Poseidon, said the transaction was a testament to the potential of the U.S. market, even in spite of challenges resulting from federal illegality.
"The announcement of Trulieve acquiring Harvest … demonstrates that near term growth and total addressable market are predominant in the USA," Paxhia wrote. "We are bullish on US cannabis and believe we could see significant upside over the next few years as inflows pick up meaningfully from institutional capital."
Trulieve and Harvest's announcement comes on the heels of a mega-merger between Canadian cannabis companies Tilray and Aphria, which closed last week. Tilray CEO Irwin Simon told Cheddar the transaction better positioned Tilray to take advantage of opportunities in the U.S. and abroad.
Cannabis data analytics firm Headset anticipates the U.S. market could generate as much as $23 billion in sales this year — far outpacing the $4 billion Canada is projected to generate.