* Deal to expand Curaleaf's presence to 19 states from 12
* Pot producers pushing into U.S. amid increasing legalization
* Cash and stock deal values Grassroots at $875 mln
* Curaleaf shares up 17.8% (Adds details on deal, background on M&A in the sector)
By Arundhati Sarkar and Debroop Roy
July 17 (Reuters) - Curaleaf Holdings Inc will buy fellow U.S. cannabis cultivator and retailer GR Companies Inc (Grassroots) in an $875 million cash-and-stock deal, expanding its reach when more U.S. states are expected to legalize recreational use of marijuana.
The company's shares jumped 18% on Wednesday, as the deal cements Curaleaf's position as one of the biggest weed companies in the world by revenue and expands its presence to 19 U.S. states from 12.
With the acquisition of privately held Grassroots, Curaleaf will get access to new markets, including Illinois, which in June became the 11th state here to legalize recreational use of marijuana by adults, as well as highly populous Pennsylvania.
To take a bigger share of the fast-growing market, several pot companies have forged partnerships and deals. The sector has seen at least 211 deals so far this year, with a majority of them focused on marijuana cultivation and retail, according to data from Viridian Capital Advisors.
The Grassroots deal comes two months after Curaleaf agreed to buy Cura Partners Inc's Select brand in an all-stock deal valued at C$1.27 billion to create the world's largest cannabis company by revenue. Canadian weed giant Canopy Growth Corp agreed to buy Acreage Holdings Inc for $3.4 billion if the federal legalization occurs.
The combined entity will have 131 dispensary licenses, 68 operational locations and 20 cultivation sites, the company said.
The deal includes $75 million in cash, 102.8 million subordinate voting shares of Curaleaf, and $40 million of Curaleaf shares.
Grassroots' securityholders will have about 16% proforma ownership in Curaleaf at closing, expected early next year. Mitch Kahn, Grassroots' co-founder and chief executive officer, will join the Curaleaf board, while other co-founders Matt Darin and Steve Weisman will join Curaleaf's senior management team.
Eight Capital acted as financial advisor to Curaleaf, while Canaccord Genuity Corp and Stoic Advisory Inc were financial advisors to Grassroots. (Reporting by Arundhati Sarkar and Debroop Roy in Bengaluru; Editing by Rashmi Aich)