A month after Cresco Labs and Columbia Care failed to close their proposed merger before the June 30 deadline, the two cannabis giants officially terminated the deal, along with a side deal that would have made Sean “Diddy” Combs the owner of the first Black-owned multi-state organization in the United States.
Cresco and Columbia Care announced the dissolution of their proposed deal on July 31, noting that the divestment deal with Combs Global was also terminated on July 28. Columbia Care subsequently announced on August 1 that it was delisting its shares from the Canadian Stock Exchange, effective at market close the following day.
“Combs Global remains committed to exploring opportunities and pushing for diversity in the cannabis industry,” said Tarik Brooks, president of Combs Global. Brooks was re-elected to the Cresco Board of Directors on July 3, on which he has served since April 2021.
Combs Global announced in mid-February that the company rebranded from Combs Enterprises to better reflect a wide range of investments.
Last November, Cresco announced a deal with hip-hop producer Combs to acquire businesses in three of the five states in which Cresco had to divest from in order for the acquisition to not violate state license caps.
With a price of $185 million, the initial terms of the deal included Combs paying $110 million in cash and assuming $45 million in debt, according to a press release from Cresco. The deal also included post-closing payments based on undisclosed “market-based milestones.”
Cresco was originally set to absorb all of Columbia Care’s shares in a major merger deal that required both parties to divest across numerous states based on ownership and licensing caps. Basically, one company is only allowed to own so many licenses, which creates redundancies that have to be sold in order to make the larger deal viable.
“In light of the evolving landscape in the cannabis industry, we believe the decision to terminate the planned transaction is in the long-term interest of Cresco Labs and our shareholders. We want to express our sincere gratitude to Columbia Care for their valuable collaboration and dedication during this transaction,” said Cresco CEO Charles Bachtell in a statement.
“Moving forward, we remain committed to our Year of the Core strategy, which involves the swift restructuring of low-margin operations, improving competitiveness and driving efficiencies in markets where we maintain leading market share, and scaling operations to prepare for growth catalysts in emerging markets,” he continued.
“After careful consideration, we are confident in the mutual decision to move forward as separate, standalone companies. This is the best path forward for Columbia Care’s employees, customers and shareholders,” added Columbia Care CEO Nicholas Vita.
Cresco Labs announced its planned $2 billion acquisition of Columbia Care in early 2022, with a projected closing date of March 31, 2023. The merger would have created a situation where Cresco would be left with more licenses than allowed in five different states. That meant the companies would have to divest some of those operations, which is a difficult task since it creates the need for a new layer of ownership approvals in each state, which is how Combs came into the picture.
During a March 16, 2023, investors call to coincide with the release of Cresco Labs’ fourth quarter report, Bachtell said the company was still working on selling operations in Florida and at least five medical dispensaries in Ohio. The company had announced two weeks earlier that it had pushed its closing deadline back to June 30, 2023. The announcement specifically cites the need to finalize divestiture agreements and obtain regulatory approval.
Both companies announced they would not be able to make their deadline on June 30, but it was not until their most recent announcement that they officially pronounced the deal was off.
“We are thankful for the collaboration and partnership with the Cresco team throughout this extensive process,” said Vita. “Over the last 16 months we have reviewed every aspect of our business, remained decisive and have made substantive changes that significantly improved our operations — positioning us with significant strategic and operational strength at this inflection point in the company’s history.”
