Cresco Labs to Buy Columbia Care in $2 Billion Deal

NEW YORK – In one of the largest Cannabis sector acquisitions yet, Cresco Labs Inc. plans to buy Columbia Care Inc. for nearly $2 billion.  According to Cresco Chief Executive Officer Charles Bachtell, the agreement will combine Cresco’s well-known Cannabis brands with Columbia Care’s retail footprint to become one of the largest U.S. multi-state operators by revenue.

Image: Charles Bachtell

Cresco’s presence will be expanded to 17 states plus the District of Columbia, according to Bachtell, who will manage the united company.

“This is how you make Miller High Life, Coca-Cola, and Johnnie Walker Blue Label out of brands like High Supply, Cresco, and FloraCal,” Bachtell said.  The deal will help Cresco gain name recognition for three of its best cannabis brands, as it will allow the company to sell products to 70% of the existing potential market, he noted.

Columbia Care shareholders will receive 0.5579 of a Cresco subordinate voting share for each share they own, valuing the acquisition at approximately $2 billion at Tuesday’s closing price. Columbia Care stockholders will receive a 16 percent premium, giving them about 35 percent of Cresco’s stock.

Cresco has been working on the agreement, dubbed “Project Jet,” for almost three months.

According to the firms, the deal will give Cresco the greatest yearly revenue in the cannabis market, at roughly $1.4 billion. The deal’s size also dwarfs Trulieve Cannabis Corp.’s C$2.1 billion ($1.7 billion) acquisition of Harvest Health & Recreation in 2021, which was one of the most significant recent mergers.

It will help Cresco diversify its business, which presently relies on just three states for more than 80% of its revenue. Columbia Care, a pioneer in the medical marijuana market, will establish a strong presence in states where Cresco did not previously sell, such as Colorado.  “They provide a significant contribution to the retail footprint; right now, we have 50 and they have 83,” Bachtell said.

The sentiment was echoed by analysts. In a research note published on Wednesday, Jefferies analyst Owen Bennett stated, “We view the combination establishing a clear industry leader.”

Cresco’s purchase is intended to strengthen the company’s position in New Jersey and New York, where recreational sales will begin this year. According to Bachtell, Virginia will be a significant future market for the united company.

By market value, the merger is expected to establish the third-largest multi-state operator in the United States. The top two are Curaleaf Holdings Inc. and Green Thumb Industries Inc.

Columbia Care reported a preliminary net loss of $147 million on revenue of $460 million for the fiscal year ending Dec. 31, up 156 percent year over year.  The agreement has caused the rise of cannabis stocks across the board today, Wednesday March 22nd.

Stoic Advisory Inc. and Solidum Capital Advisors were Cresco’s financial advisers on the purchase. Legal counsel for the corporation came from Bennett Jones LLP and Paul Hastings LLP. Columbia Care’s financial adviser was Canaccord Genuity, while its legal advisers were Stikeman Elliott LLP and Foley Hoag LLP.