TerrAscend enters Ohio market with $10.3 million purchase of NEO dispensary

This story was republished with permission from Crain’s Cleveland.

TerrAscend Corp., a multistate cannabis company headquartered in Mississauga, Canada, has announced the signing of a definitive agreement to acquire Ratio Cannabis, a dispensary in New Philadelphia, in a deal that signals more to come.

TerrAscend, which is publicly traded on the Toronto Stock Exchange (TSX: TSND)(OTCQX: TSNDF), said the deal is valued at $10.3 million, which includes $5 million in cash, $1.32 million in stock a seller’s note for $3.98 million bearing 6% interest with a two-year maturity.

The transaction is subject to regulatory approvals, which is a little more involved for a business new to the state. Company officials estimate that the deal may close in six to eight weeks.

Ohio will mark the sixth state in TerrAscend’s U.S. footprint, which includes operations in California, Michigan, Maryland, New Jersey and Pennsylvania. The business marked its entrance to the U.S. market about five years ago.

While TerrAscend is vertically integrated in some of those markets, CEO Ziad Ghanem likened the expansion strategy for Ohio to Maryland, where the company has been focused primarily on establishing a retail presence for the last few years. It reached its regulatory cap of four dispensaries in Maryland in 2023.

Ghanem notes that TerrAscend has a few different brands for its retail arm. Its Ohio dispensaries will operate under the Apothecarium moniker—which seems to be a nod in part to the pharmaceutical backgrounds of Ghanem and TerrAscend Executive Chairman Jason Wild.

Ghanem said that the company likes the Ohio market for several reasons, including its limited license dynamic, the state’s recent launch of adult-use and the way that a presence in the market helps complement the company’s existing footprint in the Northeast and Midwest regions of the U.S.

“Entering Ohio and expansion in the Midwest has long been a priority for us. With the acquisition of this well-situated and profitable dispensary, we will enter our sixth U.S. state through an accretive transaction at an attractive price,” said Wild in a statement. “This acquisition is a great first step to becoming a leader in this emerging adult-use market.”

Ghanem said the company was exploring M&A opportunities with a variety of retailers—they had been eyeing dispensaries with between $8 million to $15 million in annual revenue—and ended up signing the deal with Ratio after a relatively fast due diligence period of just three weeks.

He added that there’s a “high chance” that the business may announce at least one more dispensary deal in the coming weeks.

Ultimately, Ghanem said TerrAscend aspires to acquire its way to a now-permitted maximum in Ohio of eight dispensaries.

If some cultivation or processing licenses become available in the future, the company might consider acquiring those as well. However, that’s not a high priority in Ohio right now, Ghanem said.

He notes how the company has existing relationships with other MSOs in this market and how there is no shortage of product right now, which is a function of the medical market that’s been active here since 2019 and the build up of product that occurred in the run up to the launch of recreational marijuana sales in August.

Considering these dynamics, Ghanem said there’s no concern of having an adequate supply of products to sell.

As far as other areas within the state TerrAscend wants to expand to, Ghanem said that goal is to build a network across Ohio that’s in or near population centers, including the largest metros of Columbus, Cleveland and Cincinnati.

“We would love to have pins covering the state in a way that diversifies our presence,” he said.

TerrAscend is making its way into Ohio as the state enjoys a strong adult-use rollout. Since the launch of recreational sales, total monthly cannabis sales in Ohio have doubled.

TerrAscend announced its expansion into Ohio along with Q3 earnings reported on Nov. 6.

The company reported gross profit of $36.2 million for Q3 (down 4% from the prior quarter) on net revenue of $74.2 million (down 4.3% from the prior quarter).