By Chloe Aiello

Cannabis investment company SOL Global Investments has agreed to acquire two California-based marijuana companies, a move that would help SOL dominate the cannabis industry in a few key U.S. markets, from cultivation to retail sale, Cheddar has learned.

When it closes this deal and other pending acquisitions, SOL plans to create and take public a new multistate cannabis operator.

“Let’s work on a multistate operator, but instead of going and trying to do the 10, 12, 14-state model, let’s pick three of the top 10 states in the U.S. and execute at a very high level in those three states,” SOL Global CEO Brady Cobb said in an exclusive interview with Cheddar.

Through its subsidiary CannCure, SOL Global signed binding agreements to acquire Humboldt County-based cultivator and processor Northern Emeralds for $120 million in shares; and One Plant, a dispensary chain that currently operates six locations in California, for $17 million in cash and stock. SOL will combine Northern Emeralds and One Plant with Michigan-based MCP Wellness and 3 Boys Farms in Florida to create a new multistate operator, upon closing the deals, that it plans to take public in Canada.

The deals are expected to close Aug. 1.

The Northern Emeralds acquisitions will expand SOL Global’s footprint to include 35,000 square feet of cultivation, production and distribution facilities, and will enable the company to produce more than 16,000 pounds of marijuana flower annually. And as SOL grows One Plant’s footprint, the company anticipates it will have as many as 46 One Plant recreational and medical dispensaries across California, Michigan, and Florida by the end of 2020.

“I knew the best brands and the best new innovations in product lines were all coming out of California,” Cobb said.

“It’s the most mature market in the world, so we spent a lot of time with our team on site visits working within the industry out there to find out who’s had the best products that they’re moving, who’s developing great brand equity and making stakeholder bets on all those plays.”

Driven by political tailwinds and the progress of bills like the STATES Act, 2019 is shaping up to be a pivotal year for consolidation in the cannabis industry. SOL Global is no exception. In the past year, the company has kept busy with a flurry of M&A, most recently agreeing to acquire Michigan-based MCP Wellness for $150 million, as well as CannCure in April and Blühen Botanicals in February through SOL’s hemp subsidiary Heavenly Rx.

In spite of the company’s enthusiasm for dealmaking, however, Cobb emphasized that not all M&A is created equally, and SOL is attempting to differentiate itself from the pack by focusing on deliberate growth in fewer markets.

“It’s a bit of a land grab,” he said, referring to other competitors in the industry. “But I don’t think it’s necessarily a responsible land grab.”

“You have to deal with individual political climates and political obstacles in each and every state,” said Cobb, who is himself attuned to political trends through his work as an advocate and with Sen. Mitch McConnell’s (R-Ky.) staff on hemp legalization. “Multiply that by 18 states, and your retail team has to be good, experienced, and nimble across all those states. That’s not an easy thing to do, I don’t care what business you are.”

Some multistate operators have struggled under the various pressures and expenses of scaling.

MedMen, a well-known cannabis branding and dispensary company, has continued to report sky high expenses, offset by fundraising pushes, including a recent $250 million round from Gotham Green Partners. In April, the company announced the resignation of several executives, following allegations by the former chief financial officer in a wrongful termination lawsuit of “profligate spending” by executives, among other things.

Some multistate operators are thriving. Cobb pointed to Cresco Labs, GTI, and the recently acquired Verano, as companies that are “really prepared to win.”

Of all the mergers and acquisitions in 2019, however, perhaps none more exemplifies trends toward consolidation and challenges facing the industry than Canopy Growth’s ($CGC) $3.4 billion agreement to acquire Acreage Holdings, a cannabis company with a strong foothold in the U.S. market and a prestigious board that includes former House Speaker John Boehner and former Massachusetts Gov. Bill Weld, among others. The deal shows Canopy’s enthusiasm to secure a foothold in U.S. cannabis, a move that has been off limits due to stock exchange and federal regulations ー at least until now.

“Now that that structure has been found to be something that people are acceptable with from a regulatory level, I think you’re going to see people trying to make toeholds in the U.S. via that route,” Cobb said. “There’s going to be a lot of lawyers working on Bay Street [in Toronto] in one of those ivory towers on similar deals. There has to be right now. If there wasn’t, I’d be shocked.”

The intellectual property, capital, and resources of a company like Canopy Growth or Cronos Group ($CRON) may be something of a siren song for an ambitious and growing cannabis company, but Cobb said SOL Global will remain independent, at least for the next year or so.

“I haven’t been this excited about something in a long time, to be at a very high level in three states,” Cobb said.

Of course that doesn’t mean things will remain static for SOL, especially in the still malleable cannabis industry, where insiders liken time to dog years and change is the rule rather than the exception. For SOL this means taking its new MSO public, more acquisitions, and expanding into promising markets like New Jersey, Massachusetts, Virginia, and Maryland ー but only, Cobb said, if he can “do it the right way.”