After spending time and money fighting MedMen (OTC: MMNFF) to close on its original agreement to sell its New York assets to Ascend Wellness (OTC: AAWH), the company apparently had buyer remorse. In the frenzy of numerous companies reporting earnings last week, Ascend’s comment to investors seemed to stay under the radar. Ascend CEO Abner Kurtin decided not to close the transaction. The company said during its earnings call,
We have been engaged in negotiations with MedMen for 17 months and, because of the state of MedMen’s assets, it is time for all of us to move on. Because we will not be moving forward with the MedMen transaction, we have $70 million of unencumbered cash at a time
when cash is (inaudible). In addition, as many of you know, the regulatory environment in New York remains highly uncertain given the unknown timing of the commencement of adult-use sales, unclear licensing process, and the lack of policing of the illicit market. As a result, the New York market is not a priority for AWH, but we will continue to monitor it closely.
Kurtin was asked on the earnings call whether the decision to bail out of the MedMen deal would result in more litigation. He answered, “In terms of New York, there’s really no agreement because we had signed a term sheet for a settlement that ended up not going forward. The remaining litigation is by us to close the original transaction that they failed to close last December. So, we anticipate this being the end of the matter, though we can’t control what others do. As we move forward here, we’re looking, per the termination agreement, to the refund of certain monies that we paid from them at the outset of the transaction.”
New York Fears
Kurtin went on to express his doubts about the New York market. He said, “So the way I would describe New York is the highest beta opportunity in the country. New York, obviously, 20 million people going adult use, has a lot of potential. The problem is, as we discussed, there’s no visibility on a bunch of issues and the regulators don’t seem particularly clear about what they want to do with licensing and what they want to do with the illicit market. That gives the potential for New York to end up like L.A. And L.A., as we know, is a very difficult market for cannabis operators. But we don’t have a crystal ball and it could be great and we’re going to look at other opportunities to enter that state. Just as that deal terminated and we look at fresh opportunities, we’re more excited about Ohio and Maryland and expanding in Illinois and the ability to expand in our core states where we’re having success. So, for us, it’s more about that than a particular view on New York.”
With regards to Ohio, Ascend announced last week that it was buying Ohio Patient Access LLC. This transaction will add three medical dispensaries to its portfolio in Ohio and will bring Ascend to the state-imposed five dispensary cap and further its exposure to this highly populated state with near-term rec potential.
Kurtin said, “We have plans to build the dispensaries in central retail quarters in Sandusky, Piqua, and Cincinnati, respectively. The Cincinnati location will be our Ohio flagship store and will be the only dispensary in downtown Cincinnati. Not only will the dispensary be across the street from a casino and less than a mile from the Bengals and Reds Stadium, but it is the closest dispenser to the Kentucky border and intersects two major highways. This model is representative of our core retail philosophy to never sacrifice location.”
MedMen also doesn’t seem interested in its New York assets even after it fought to keep the deal with Ascend from going through. The company said it was looking at selling the assets when it announced it had closed on a deal to sell its Florida assets. During the legal wrangling, MedMen had been accused of letting the New York properties decline and the company is rumored to have a very high rent payment on its expensive 5th Avenue location.