Cresco Labs Zeroes In On Acquisition of Columbia Care

Cresco Labs’ leaders are attempting to acquire Columbia Care for $2 billion.  If the acquisition comes to fruition, it would create the largest revenue footprint in the industry’s history.  At the moment, Curaleaf projects $1.4 billion of revenue for the current year.  Though Cresco Labs’ earnings released last night were a disappointment for psychedelics investors in that the company reported lower than expected revenue and EBITDA numbers, there is hope in the form of a potential Columbia Care acquisition.

Details of the Potential Deal

If the deal referenced above closes, it will be finalized in the final quarter of the year.  The acquisition would be one of the largest ever in the history of the country’s cannabis industry.  The potential meshing of these massive vertically integrated marijuana businesses was announced today, March 23.

Cresco Labs, based in Chicago, has joined a definitive arranged agreement to purchase Columbia Care.  Cresco would obtain all of the outstanding and issued shares of Columbia Care that will close in the final quarter.  Once finalized, the deal would amount to a figure that compares to the $2.1 billion deal between Trulieve and Harvest Health that closed last year.  However, the value of the Cresco Labs deal won’t exceed that of Tilray’s merger with Aphria from the spring of 2021 that resulted in a company with a combined market capitalization in excess of $8 billion.

A Statement From Cresco Labs’ CEO

Charles Bachtell, the CEO of Cresco Labs, issued a press release in which he stated he is excited to announce the transaction and that it will serve as an inflection point in the company’s development.  Bachtell stated the acquisition will combine the industry’s leading operators for a whole that is greater than the sum of the parts, ultimately boosting diversification, depth, scale and growth across posterity.  Bachtell wrapped up his statement by noting how the combination of Columbia Care and Cresco Labs hastens the company’s journey to becoming the premier cannabis specialist.

Deal Highlights

If the deal is consummated, it will result in the most expansive multistate operator in terms of pro-forma revenue in the context of cannabis at $1.4 billion.  Just as important is the fact that the deal would help the company establish a nationwide footprint with 130+ retail sites in nearly 20 states.  All in all, this retail footprint would be the second largest in the entirety of the nation and the largest outside of the Sunshine State of Florida.  

The acquisition would also cover each of the 10 fastest-growing and largest markets within the ensuing three years, equating to just under 60% of the country’s population and nearly three-quarters of the addressable marijuana market.  

The two companies currently have the number one market share position in Virginia, Colorado, Pennsylvania and Illinois along with the second-largest market share in Massachusetts.  The deal would set the stage for Cresco Labs to establish a position in the top three of market share in Florida, New Jersey and New York.  

The deal would also set the stage for Cresco Labs to establish a material market share within the top seven in three years or less.  Perhaps what matters most is that the deal would provide Cresco Labs with critically important exposure to the adult-use market, creating significant upside with the opportunity to gain market share in the most coveted markets of New York, Ohio, Florida, Maryland, Virginia, New Jersey and Pennsylvania.

Columbia Care’s CEO Comments on the Deal

Nicholas Vita, the CEO of Columbia Care, spoke with the media after word of the deal spread.  Vita stated that he has focused on providing the best possible outcome for its shareholders since the company’s founding.  

Vita points to the potential deal as an opportunity for the company to achieve its mission.  The company’s strategic nationwide footprint in the top markets along with Cresco Labs’ track record of success and elite branding will create a juggernaut that captures additional market share and attracts that many more investing dollars.

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