Multistate operator and cannabis titan Curaleaf has been sued over allegations that it wrongly changed the deal terms of a merger after the purchase had already closed.
Three-state operator Tryke Companies, which does business as Reef Dispensaries, was purchased last year by Massachusetts-based Curaleaf in a deal worth $85 million in cash plus stock shares that brought the value of the purchase to $181 million. Tryke alleged in a lawsuit filed in Delaware Chancery Court that Curaleaf has wrongly tried to drive the cash price down by $12.9 million after the deal closed, with no justification for the change, Law360 first reported.
The acquisition brought Curaleaf more cannabis dispensaries and cultivation operations in Arizona, Nevada, and Utah, while Curaleaf shifted its focus to more limited-license markets and away from more saturated and competitive states like California.
The deal had called for Curaleaf to pay $10 million in cash up front and then another $75 million in installments after the deal closed.
In early 2023, following the close in October 2022, Curaleaf “with virtually no explanation” lowered the purchase price, citing “sale agreement terms” that Curaleaf contended allowed such a switch, the lawsuit said.
“Curaleaf sought to eviscerate the value of the transaction” while “ignoring and undermining seller’s contractually bargained for information rights by stonewalling seller’s efforts to understand the basis for Curaleaf’s calculation,” the suit alleges.
While ignoring Tryke Companies’ call for access to the records or documents used to justify the price change, Curaleaf also launched a “dispute resolution” with a third-party accountant, cutting Tryke out of the process, the suit asserts.
The suit argues that the final payments due to Tryke “cannot go forward until Curaleaf provides the documentation it is obligated to provide in support of the adjustments it has asserted.”
Curaleaf did not respond to a request for comment from Law360.
Curaleaf has lost more than $600 million since January 2022, according to its most recent quarterly financials.