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MSO Cresco Labs Buys MSO Columbia Care to Become Largest MSO

The cannabis corporation Cresco Labs, a Multi-State Operator (MSO), is buying the MSO Columbia Care, which has locations in South Jersey, to create the largest cannabis corporation.

Columbia Care operates the Cannabist dispensaries in Vineland and Deptford.

“The combined company will be the largest cannabis company by revenue, the number one wholesaler of branded cannabis products, and the largest nationwide retail footprint outside of Florida,” said Charles Bachtell, CEO of Cresco Labs. “I couldn’t be more excited about this enhanced platform. And how it furthers the Cresco Labs vision to be the most important and impactful company in cannabis.”

The company expects to have annual revenues of over $100 million in 8 different states by 2023. As the combined company increases depth across other markets and diversifies its revenue base.

“In an evolving industry, the opportunities to better achieve our mission through consolidation led us to this historic moment,” said Columbia Care CEO Nicholas Vita.

This acquisition brings together two of the largest MSOs in the cannabis industry. The corporations have the dominant share in Illinois, Pennsylvania, Colorado, and Virginia, the number two positions in Massachusetts, and a pathway to a top-three position in New Jersey, New York, and Florida.

Transaction Highlights

The combined MSO will have over 130 retail stores across an 18-market footprint. That will be #2 retail footprint in the industry and the #1 retail footprint outside of Florida. The combined company could cover the top 10 largest and fastest-growing markets by 2025. That’s representing approximately 55% of the U.S. population and over 70% of the cannabis market.

Cresco Labs’ Sunnyside retail stores have an average annualized revenue per store of over $11 million. It’s the highest of any scaled national operator in the industry.

The transaction has been approved by the Board of Directors of both Cresco Labs and Columbia Care.

Columbia Care Benefits

Columbia Care shareholders will hold approximately 35% of pro forma Cresco Labs shares.

Their shareholders will receive 0.5579 of a subordinate voting share of Cresco Labs for each Columbia Care common share held. It’s subject to adjustment representing a total consideration enterprise value of approximately $2.0 billion based on the closing price of Cresco Labs Shares on the Canadian Securities Exchange (CSE) as of March 22, 2022.

The transaction provides Columbia Care shareholders with premiums per Columbia Care share of approximately 16%. It’s based on the closing prices of the Columbia Care shares and the Cresco Labs shares. And 19%, based on the 20-day volume-weighted average prices of the Columbia Care Shares and the Cresco Labs Shares, each on the CSE as of March 22, 2022.

Columbia Care shareholders will hold approximately 35% of the pro forma Cresco Labs Shares.

The transaction is subject to the receipt of the necessary approvals of the Supreme Court of British Columbia in Canada. It also needs the approval of two-thirds of the votes cast by Columbia Care shareholders at a special meeting and the receipt of regulatory approvals.

Mediocre Cannabis

I went to Massachusetts last year and bought Cresco Labs cannabis flower in the bag pictured above. I’ve had better. It was a little stale.

The deal might not go through. It is subject to regulatory and financial issues.

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