MedMen Enterprises Inc. (MMNFF) entered into a letter of engagement with Eight Capital to purchase, as co-lead underwriter and joint bookrunner, along with Cormark Securities Inc. as co-lead underwriter and joint bookrunner, and a syndicate of underwriters 13,636,364 units of the company on a “bought deal” basis at a price per Unit of CAD$5.50 for gross proceeds of CAD$75,000,002. The deal is scheduled to close on or about September 28.
In addition to the C$75 million, MedMen has agreed to an over-allotment option to purchase up to an additional 15% of the units at the same price. If this option is exercised, then MedMen will get an additional C$11,250,000 bring the potential total gross proceeds to roughly C$86,250,000 million.
MedMen said it plans to use the proceeds for continued expansion of its retail footprint across attractive cannabis markets, development of its cultivation and production facilities, working capital and general corporate purposes. MedMen currently operates 19 licensed facilities in California, Nevada and New York.
The money will also go towards the newly announced Florida acquisitions. MedMen said it had secured prime retail locations with long-term leases in Ft. Lauderdale, Miami Beach, West Palm Beach, St. Petersburg and Key West. This is keeping with the MedMen strategy of entering premium retail districts with high visibility and heavy foot traffic.
“Our entry into Florida through this acquisition demonstrates our growing national footprint as well as our ability to execute,” said Adam Bierman, MedMen chief executive, and co-founder. “Our real estate team is hard at work preparing to put MedMen branded stores in the most coveted locations in Florida – locations in highly desirable and defensible market areas with high foot traffic and proximity to popular brand retailers.”
Going into Florida won’t come cheaply. MedMen will pay $53 million, half of that in cash. The rest according to a company statement will come from an issuance of 8,549,132 common units of MM Enterprises USA, LLC, a subsidiary of the company, which by their terms are ultimately redeemable for Class B Subordinate Voting Shares of the Company starting on January 1, 2019. The LLC has paid Treadwell Nursery US$6,625,000 in cash as of closing date, September 6, 2018, and will pay the same amounts in cash on each of the dates that are three, six and nine months after the closing date.
Florida is quickly becoming a popular state among cannabis companies. It is the third most populous state in the U.S. with a rapidly growing medical cannabis market and large potential adult use market. The state has high tourist activity and is home to the largest elderly community in the nation. According to ArcView, medical cannabis sales are estimated to be approximately US$1.4 billion by 2021.