A employee trims leaves of young cannabis plants in a greenhouse at a Cresco Labs Inc. facility in Indiantown, Florida, U.S., on Monday, March 28, 2022.
Eva Marie Uzcategui | Bloomberg | Getty Images
A $2 billion mega-deal between cannabis multistate operators Cresco Labs and Columbia Care has gone up in smoke greater than a yr after the businesses announced the acquisition, the businesses said Monday.
The merger, announced in March 2022, would have created the biggest cannabis company within the U.S. and been a boon for an industry showing signs of slowdown because it weathers economic and regulatory challenges.
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“In light of the evolving landscape within the cannabis industry, we consider the choice to terminate the planned transaction is within the long-term interest of Cresco Labs and our shareholders,” Cresco CEO Charles Bachtell said in a statement.
The termination was agreed upon mutually, the businesses added, and neither party pays any related penalties or fees.
The plan for Chicago-based Cresco to purchase Latest York-headquartered Columbia Care in an all-stock transaction began to unravel when the businesses didn’t divest enough assets mandatory for regulatory approvals by a June 30 deadline.
Bachtell said within the press release this can be a “tough economic time” for the industry and that Cresco will double down on its core business, including “swift restructuring of low-margin operations.”
Cresco’s market capitalization is about $700 million, down from about $2.7 billion when the deal was announced. Columbia Care has a market cap of about $200 million.
Columbia Care CEO and co-founder Nicholas Vita added that after careful consideration, the choice to stay solo is “the most effective path forward for Columbia Care’s employees, customers, and shareholders.”
The businesses also said Monday they’ve scrapped a $185 million cope with Sean “Diddy” Combs that will see the hip-hop mogul acquire some divested operations in Latest York, Massachusetts and Illinois.
The cannabis landscape has been in downturn recently, as sales decline in lots of legal states and investment money dries up. The industry is not seen because the secure bet it once was amid a scarcity of federal regulation and banking reform that has kept operators from scaling.
The Secure and Fair Enforcement Banking Act, or SAFE, is essentially the most crucial of such reforms needed to grow the cannabis industry. The bipartisan laws would unlock banking services for the cannabis industry, which has been kept out of traditional banking and loans as a consequence of marijuana’s federal standing as a Schedule I substance, together with heroin and LSD.
Last yr, the laws didn’t advance through Congress for the seventh time, despite the industry’s best efforts to galvanize lawmakers behind it. Senate Majority Leader Chuck Schumer (D-NY), who’s leading the push for SAFE banking in Congress, has signaled it could pass this fall.