As of July 31, 2023, Cresco and Columbia Care, two of the largest multi-state operators (“MSOs”) in the US cannabis industry have agreed to terminate their proposed merger which had been valued at $2 billion when originally announced. The official reasoning for the termination is complexities and a lack of incoming capital to fund the restructuring required in Ohio and Florida. Both Cresco and Columbia Care held assets in Ohio and Florida and, due to the state-level restrictions, one or both would need to divest their holdings in each state to move forward as a merged entity. A part of this deal was that certain assets were to be sold to Sean “Diddy” Combs and, as a result of the termination of the merger, those assets are no longer being transferred.
What does this say about the industry at large? My takeaway is simple: disjointed regulations from state to state are preventing industry consolidation. In most industries, it would be a simple acquisition, eliminating redundancies, and merging operations going forward. In cannabis, it is divesting in multiple states with multiple regulators, likely with disparate rules for who is even eligible to purchase any particular assets. And that is just to get the transaction approved, then you need to go through the organizational restructuring. Plenty of people will say this is good for cannabis. Consolidation of massive MSOs is seen as a negative in many states seeking to maintain local operators.
Since the merger announcement last year, the stock prices for both companies have plummeted: Cresco went from $6.50 per share to just over $1.50; Columbia Care from $3.10 to $0.40. Columbia has also gone through laying off 25% of their workforce in 2023 among other challenges.
If you need expert advice or involved in an MSO merger, feel free to reach out to our Seattle Cannabis Law Firm and see what we can do for you. We also have offices in Portland, Los Angeles and San Diego.