MedMen and PharmaCann announced Tuesday they will end a merger agreement that would have solidified MedMen’s position as one of the largest multi-state operators in the United States.
The termination of the deal, which was signed in December 2018, comes after a year of several major mergers and acquisitions announcements within the cannabis industry such as Canopy Growth’s $3.4 billion acquisition of Acreage Holdings, Cresco Labs’ $823.5 million acquisition of Origin House, and Harvest Health and Recreation’s $850 million acquisition of Verano Holdings. The Canopy acquisition will only go into full effect once cannabis is federally legal in the US, and both the Cresco and Harvest deals await approval from the Federal Trade Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act.
MedMen pointed to several factors for the decision: a desire to focus on California, the biggest market in the US and one in which the company has a significant presence; the “underperformance” of cannabis stocks in the US and Canada this year; and delays caused by “regulatory hurdles at the federal and state level.”
One of those hurdles, as Cannabis Wire previously reported in our daily newsletter, was in New York, where each company held one of ten vertically integrated licenses, and regulations only allow for a single entity to hold a single license. Department of Health spokesperson Jill Montag told Cannabis Wire in August, “Before the proposed merger between MedMen and PharmaCann may occur, PharmaCann must close its four dispensing facilities and surrender its registration to the Department.” And MedMen would have been obliged to offer PharmaCann products and to deliver those products for free wherever PharmaCann had been serving patients.
“We believe it is now in the best interest of our shareholders to deepen, rather than widen, our Company’s reach,” MedMen co-founder and chief executive officer Adam Bierman said in the announcement.
Under the termination agreement, in exchange for forgiveness of $21 million debt, MedMen will get from PharmaCann cultivation, production, and retail assets in Illinois, and a vertically integrated licensed entity in Virginia. Bierman continued in the announcement, “Looking at the PharmaCann portfolio today, Illinois has emerged as the most attractive opportunity for our longer-term, strategic growth plan. The addition of those assets, without dilution, is a win for MedMen and our shareholders.”
Looking ahead, PharmaCann spokesperson Jeremy Unruh told Cannabis Wire that “Illinois and Virginia are in much different postures as far as the development of the markets is concerned,” noting that the company is focused on preparing for adult use sales in January in Illinois, while in Virginia they “are working with the stakeholders to bring the first facilities online now” for medical cannabis.
MedMen, which did not respond to requests for comment, also announced the appointment of Zeeshan Hyder as Chief Financial Officer. Hyder, MedMen’s current Chief Corporate Development Officer, replaces Michael Kramer, whose termination was announced this week. And Kramer was hired to replace James Parker, who sued the company after he left, claiming that MedMen had breached their contract and wrongfully terminated him.
MedMen will release its fourth quarter earnings on October 28.
