The Cannabis M&A Wave Is Here. Curaleaf Proved It. Here's Whether Green Thumb Should Ride It -- or Wait to Be Swept Up.

U.S.-based cannabis company Curaleaf Holdings (OTC: CURLF) said on Aug. 18 it has begun a takeover bid of Canadian cannabis retailer Aurora Cannabis (NASDAQ: ACB), valuing Aurora at around $260 million.

Under the proposal, Aurora shareholders would receive 0.3463 Curaleaf shares and $0.75 in cash per Aurora share, for a total consideration of $4 per Aurora share. The offer is capped at $5 per share if Curaleaf's stock rises above a set level. Aurora closed Friday at $3.94.

Despite Aurora's financial difficulties -- the medical marijuana retailer had an earnings-per-share (EPS) loss of $0.07 in the first quarter of fiscal 2027, and it reported $93.7 million in debt -- the company is attractive to Curaleaf because of its market share in Europe. The move would improve Curaleaf's global footprint and leverage its operational expertise to sell Aurora's high-quality products.

The expected rescheduling of marijuana from Schedule I to Schedule III of the Controlled Substances Act will make it easier for retailers to write off business expenses, including rent, and may prompt other mergers and acquisitions (M&A), as larger companies will pay less in taxes and thus have more money to expand. The U.S. Drug Enforcement Administration (DEA) hearings on reclassifying all cannabis as a Schedule III drug recently concluded, but the outcomes are still pending.

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Is Green Thumb Industries likely to follow Curaleaf's lead?

Green Thumb Industries (OTC: GTBIF) is one of the most profitable cannabis retailers in the U.S. and has more than 140 retail stores across 14 U.S. markets. Will the company will use the rescheduling opportunity to scoop up other cannabis companies to gain market share?

The suggestion that Green Thumb Industries will acquire another cannabis operator following the federal move to Schedule III can't be ruled out, given its history of acquisitions. However, any dealmaking will probably be disciplined rather than aggressive.

Green Thumb enters this post-rescheduling environment in a stronger position than most multi-state operators. With the elimination of Section 280E tax penalties, the company stands to retain significantly more operating cash flow. Its recent moves, including filing DEA registration applications for its medical facilities and expanding its share buyback program, signal that management is confident in its balance sheet and long-term strategy.

It hasn't acquired another cannabis company recently, but five years ago, it made several state-level bolt-on acquisitions to secure limited-license market access and scale rapidly.

In late 2021, it acquired LeafLine. This gave Green Thumb entry into Minnesota's limited-license medical market, bringing along a cultivation facility and multiple retail dispensaries. Earlier that year, it gained cultivation capacity and retail access in Rhode Island with its purchase of the Mobley Pain Management and Wellness Center.

In 2019, the company made three moves. One that has paid off is its $60 million acquisition of Fiorello Pharmaceuticals, because that gave the company a vertically integrated medical cannabis license in New York. Green Thumb also spent $290 million to buy Integral Associates, gaining retail stores and cultivation and processing assets in Nevada and California. It also bought up the rights to the Beboe brand in 2019.

The company is well-equipped for more deals

Rather than pursuing megamergers, Green Thumb is more likely to acquire smaller, single-state operators or distressed assets in high-conviction, limited-license states (such as Florida, New York, or Ohio) where expanding its cultivation or retail footprint yields immediate scale.

Its management has favored organic growth, cash-flow preservation, and share buybacks over expensive dilution. In the second quarter, it had stock buybacks of $48.3 million, roughly 7.9 million shares.

While rescheduling lowers the cost of capital across the sector, Green Thumb will likely maintain a strict return on invested capital threshold for any prospective deal.

Many smaller operators remain burdened by debt accumulated during the high-interest, 280E era. Green Thumb can use its relative financial strength to pick up valuable real estate, processing infrastructure, or state licenses at steep discounts.

Green Thumb reported second-quarter revenue of $306.7 million, up 4.6% year over year, and its EPS was $0.02, compared to an EPS loss of $0.06 in the same quarter a year ago. It had $283.6 million in cash at the end of the quarter, enough to finance a medium-sized merger.

Smaller deals are more likely than a big acquisition

The upshot is that Green Thumb certainly is willing and has the wherewithal to go on an M&A spree, but don't count on it. The company is more likely to make smaller deals that make sense right away, taking advantage of distressed companies to gain valuable assets and locations.

James Halley has no position in any of the stocks mentioned. The Motley Fool recommends Green Thumb Industries. The Motley Fool has a disclosure policy.