MedMen Enterprises Inc. (CSE: MMEN) (OTCQX: MMNFF) finally agreed to close the deal to sell its New York assets to Ascend Wellness (OTC: AAWH). The two companies had initially agreed to the transaction, but then MedMen was accused of having “buyer’s remorse” by Ascend when it tried to pull out of the deal. The two companies then engaged in a nasty legal battle with MedMen accusing Ascend of greasing politicians‘ hands in the state. MedMen NY owns and operates four medical cannabis dispensaries located in Manhattan, Long Island, Syracuse, and Buffalo; and one cultivation facility located in Utica, New York.
MedMen said the new settlement will bring more money to the company’s shareholders, although the increased amount is only $15 million. The deal is expected to close in 30 days. According to a statement, “Under the terms of the settlement agreement, AWH will pay MedMen $88 million: $73 million as an assumption of debt and $15 million in cash. Other terms of the transaction will be as originally announced in February 2021.”
In MedMen’s most recent earnings announcement, the company noted it only had $14 million in cash as of the end of March. The current liabilities for the company are $375 million. It had a net loss of $30 million on quarterly revenues of just $35 million.
“This resolution is a clear win for MedMen shareholders, as the company will receive $15 million in additional value,” said Michael Serruya, MedMen’s Chairman of the Board. “This resolution enables MedMen to move forward with plans to significantly restructure its balance sheet, reduce debt, and focus on its core markets.”
Serruya was only the interim CEO for MedMen and two weeks ago he was replaced when Edward Record was appointed CEO. Record joined MedMen’s Board of Directors in 2021. He brings deep retail and restructuring experience, having overseen financial and operational performance for several large national retailers. He previously served as the Chief Financial Officer for Hudson’s Bay Company, whose U.S. holdings include Saks Fifth Avenue. Before joining HBC, Record was Chief Financial Officer for J.C. Penney. At the same time, MedMen’s COO Roz Lipsey, notified the company of her decision to resign, effective May 20, 2022.
A statement by Ascend showed that the company would receive a 99.99% controlling interest in MedMen NY at closing. AWH will pay MedMen $74 million at closing, inclusive of the $63 million transaction consideration and the $11 million settlement payment. AWH has already paid $4 million of the consideration as a deposit. AWH said it will make a subsequent payment of $14 million upon the first sale of recreational cannabis in a MedMen NY dispensary, inclusive of the $10 million transaction earn-out and the incremental $4 million related to the settlement. There will be no additional earn-outs and no assumption of debt.
While MedMen is claiming to have received more money, in the initial deal, Ascend was only going to get 86.7% of the company with an option to buy the remaining amount. Now it seems it got that amount for just $15 million.
“We are thrilled to put this dispute behind us and look forward to the imminent closing of this transaction,” said Abner Kurtin, Founder, and CEO of AWH. “We continue to build scale in some of the most sought-after locations in premier, limited license markets in the country, and with this investment, we will bring our high-quality products and exceptional retail experiences to our seventh state. While we always seek accretive deals, this transaction is particularly attractive given a recent comparable acquisition valued at $247 million.”
T. Andrew Brown, President of AWH NY, added, “We look forward to shifting our attention toward operating the four dispensaries, expanding the cultivation facility, and working alongside the Office of Cannabis Management and the Cannabis Control Board. Servicing the patients of New York, creating diverse jobs, and enhancing our social-equity initiatives throughout the state are among my top priorities.”