Cresco Labs, Columbia Care Push Megadeal to Summer 2023

Analyst: Concern remains about the divestitures that need to happen.

Sunnyside dispensaries’ parent company Cresco Labs (OTCQX: CRLBF) and Cannabist owner Columbia Care Inc. (OTCQX: CCHWF) formally agreed to extend the closing date of their $2 billion, all-stock megadeal to June 30, 2023.

In a statement on Monday, the two hinted that the deal is still on after months of speculation amid rising turmoil in the cannabis industry and a downturn in corporate equity prices.

The extension will allow the two more time to finalize accords and obtain certain regulatory approvals needed to close, the companies said.

“We are making good progress on the remaining divestitures and moving closer to completing the Columbia Care Acquisition,” Cresco Labs CEO Charles Bachtell said. “Given the current divestiture and regulatory approvals timeline, we now expect closing to occur sometime before the end of June 2023.”

“In the meantime, our teams are doing the hard work of streamlining operations and optimizing our asset base to be the strongest company we can upon closing.”

Cresco also said it would provide more updates on the deal during a March 16 investors call before the market opens, when the company reports its fourth quarter and annual financials.

Both companies have signaled commitment to the deal since the March 2022 announcement, though the failure of both Chicago-based Verano’s planned $413 million purchase of Goodness Growth and Ascend Wellness’ proposal for MedMen’s New York retail stores has raised questions about the marketability of the Empire State’s assets. The crash of equity prices also reduced the likely proceeds from other planned asset sales in other markets.

Sean “Diddy” Combes snapping up assets from Cresco and Columbia Care made the closing a bit more real, despite market rumors behind that $185 million deal.

One of the top reasons for concern relates to the asset sales program, according to Viridian Capital Advisors’ director of data analytics Frank Colombo.

“The Diddy deal closing is perhaps the most significant concern as it promises to fund $180 million of cash for debt paydown post-closing,” Colombo wrote. “The transaction was inked before NY released its rules which say that ROs can only have three adult dispensaries (Diddy would have 4) and that they can only be medical for three years after the first adult sales in the market. Is it possible that the deal could break over this? The crash of equity prices has also reduced the likely proceeds from other planned asset sales in Ohio, Maryland, and Florida.”

“The net result is a combined company with more debt than initially planned at refinancing rates that continue to climb. Still, the deal has gone a long way down the tracks towards closing.”

Adam Jackson

Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at adam.jackson@crain.com.


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