Vireo Growth Inc. (CSE: VREO / OTCQX: VREOF) is taking a significant step to deepen its presence in the U.S. cannabis market by agreeing to acquire approximately 86% of the outstanding senior secured convertible notes of Medicine Man Technologies Inc., better known as Schwazze. The transaction, valued at about $62 million, will be settled through subordinate voting shares of Vireo, marking the latest move in its focused effort to grow through strategic acquisitions. This deal is expected to close later this month, pending customary approvals and conditions.
This acquisition fits squarely within Vireo’s methodical approach to building a strong, multi-state cannabis platform. Founded in 2014, Vireo has steadily evolved into a vertically integrated operator that emphasizes local market expertise combined with a national footprint. With operations spanning key markets such as Maryland, Minnesota, and New York, Vireo manages the cultivation, manufacturing, wholesale, and retail of cannabis products across both medical and adult-use channels. The company currently operates multiple cultivation facilities and retail dispensaries, serving thousands of customers every month.
What distinguishes Vireo in a fragmented and often capital-strained industry is its dual focus on disciplined financial management alongside operational scale. The company’s recent mergers introduced four single-state operators to its portfolio, expanding its footprint to six states, nine cultivation sites, and 48 retail dispensaries. These moves, combined with a $75 million equity raise and licensing agreements for proprietary technology platforms such as Arches, which enhances delivery and analytics capabilities, highlight Vireo’s push toward creating efficient and unified operations that reduce costs while improving customer engagement.
The $62 million investment in Schwazze’s notes will be paid in Vireo’s subordinate voting shares at a price of $0.54 per share. By purchasing these notes well below par value, Vireo gains greater influence over Schwazze’s financial structure and positions itself to integrate or capitalize on Schwazze’s assets in the expanding cannabis market. Such acquisitions form an integral part of Vireo’s M&A strategy that prioritizes acquiring distressed yet promising assets with minimal overlaps in geographic markets, thereby enhancing scale without diluting focus or operational efficiency.
From a financial standpoint, Vireo maintains a careful balance between growth and leverage. Pro forma 2024 figures estimate revenue at $394 million and adjusted EBITDA of $94 million, supported by a healthy cash position and a leverage ratio of just 0.8x EBITDA. This measured balance sheet approach sets Vireo apart from many U.S. cannabis operators who often face liquidity challenges and rely heavily on highly dilutive financings. With refinancing efforts underway to improve liquidity further, Vireo’s capital discipline provides a stable foundation for continued acquisitions and operational expansions.
The company’s leadership changes in recent years underscore a strategic focus on execution and financial prudence, which has helped Vireo create a scalable infrastructure. This setup not only aids in seamless integration of new assets like Schwazze’s notes but also supports ongoing operational efficiency across diverse local markets. Their growth model hinges on empowering local teams while leveraging shared corporate services and technology, a balance that aims to optimize costs and maximize overall portfolio value.
While the cannabis industry continues to attract attention amid growing legalization and expanding consumer demand, competitive pressure remains fierce. Vireo’s acquisition strategy capitalizes on this environment by targeting deals that enhance market presence without straining resources. The Schwazze notes acquisition exemplifies this approach, allowing Vireo to reinforce its footprint with a financial instrument that could translate into further control or influence over a growing multi-state operator.
This transaction reflects Vireo Growth’s commitment to building a robust and financially sustainable cannabis portfolio. The company’s long-term mindset, combined with its strategic capital deployment and market expertise, positions it to navigate the complexities of the evolving U.S. cannabis market successfully.
