Cresco Labs Acquires Columbia Care In Move Towards Market Domination
Today Cresco Labs (CSE:CL) (OTCQX:CRLBF) announced that the company has entered into a definitive arrangement agreement with Columbia Care Inc. (NEO:CCHW) (CSE:CCHW) (OTCQX:CCHWF) that will see Cresco Labs acquire all Columbia Care issued and outstanding shares. The transformational deal is subject to customary closing conditions and necessary regulatory approvals with Cresco expect the close of the acquisition in Q4 2022.
The acquisition will combine Cresco’s best-in-class wholesale and retail operations with an expanded strategic footprint throughout the largest and fastest growing markets in the cannabis industry.
Terms of Agreement
Under the terms of the Arrangement Agreement, shareholders of Columbia Care will receive 0.5579 of a subordinate voting share of Cresco Labs for each Columbia Care common share (or equivalent) held, subject to adjustment. The Consideration represents total enterprise value of approximately US$2.0 billion based on the closing price of Cresco Labs Shares on the CSE as of March 22, 2022.
The Transaction provides Columbia Care Shareholders with premiums per Columbia Care Share of approximately 16% based on the closing prices of the Columbia Care Shares and the Cresco Labs Shares, and (ii) 19%, based on the 20-day VWAP of the Columbia Care Shares and the Cresco Labs Shares, each on the CSE as of March 22, 2022.
After giving effect to the Transaction, Columbia Care Shareholders will hold approximately 35% of the pro forma Cresco Labs Shares.
Benefits of Cresco’s Columbia Care Acquisition
There are multiple key transaction highlights and benefits associated with this latest news. One of the initial benefits is the increased market access now available to Cresco.
Upon acquisition, Cresco Labs will become the largest Multi-State-Operator (“MSO”) by pro-forma revenue at over $1.4 billion. The combined company will have a strategic, national footprint with over 130 retail stores across 18 markets.
This footprint represents the second-largest retail footprint in the industry and the largest retail footprint outside of Florida. The company will cover all 10 of BDSA’s top-10 largest and fastest growing markets by 2025, representing approximately 55% of the U.S. population and over 70% of the addressable cannabis market. This will allow the company to have a strong presence in key markets and continue to grow its customer base.
The companies currently have the number one market share in four states (Illinois, Pennsylvania, Colorado, and Virginia), the number two market share in Massachusetts, and a pathway to being a top-three company in three more states (New York, New Jersey, and Florida) by 2025. This puts the combined company in a very strong position in seven of the top 10 markets by revenue.
The combined company will have a strong presence in today’s most influential markets, as well as those with the strongest potential for growth in adult use. This includes states like New York, New Jersey, Virginia, Pennsylvania, Ohio, Maryland, and Florida. Having a foothold in these key markets gives the company significant exposure to the upside of the adult-use market.
Additionally, the new relationship highlights the companies proven capabilities across the wholesale and retail cannabis markets.
The industry’s leading brand portfolio gives Cresco the number one market share in the United States. The company has a strong presence in every major segment, including #1 branded flower, #1 concentrates, #1 vapes, and Top 5 edibles. This allows them to better serve our customers and meet their needs.
Cresco Labs’ Sunnyside retail stores have an average annualized revenue per store of over $11 million, the highest of any scaled national operator in the industry. This makes their banner one of the most productive in retail.
Cresco’s wholesale platform is the most successful in the industry, with projected Q4 2021 revenue of over $120 million. This makes the company the the go-to choice for businesses looking for high-quality products at competitive prices.
The combined company is expected to achieve annual revenues of more than $100 million in eight states by 2023. This growth will come from expanding into new markets and diversifying the revenue base. This increased scale and diversification will help to make the company more successful and stable.
The company plans to improve its revenue mix by increasing the proportion of retail revenue to 65% of total revenue, up from 47% today. This will increase vertical integration and scale, driving profitability improvement.
The ability to increase retail productivity, reduce redundant operational and capital expenses, and de-lever the organization through the proceeds from the sale of redundant licenses and assets in high-value markets provides opportunity for synergies and de-levering. This means that the company will be able to make more money while reducing its overall debt. This is a positive for the company and its shareholders.
About Cresco Labs Inc.
Cresco Labs is a leading cannabis company with a mission to make the industry more professional and normalize it for consumers. They employ a CPG approach, making them the largest wholesaler of branded cannabis products in the U.S. This means they focus on creating high-quality products that meet the needs and wants of consumers. By doing so, they hope to elevate the cannabis industry as a whole.
Cresco brands are designed to meet the needs of all consumer segments by providing some of the most recognized and trusted national brands. These include Cresco, High Supply, Mindy’s Edibles, Good News, Remedi, Wonder Wellness Co., and FloraCal Farms. Sunnyside is a dispensary brand focused on wellness and created to build trust, education, and convenience for both existing and new cannabis consumers.
Cresco Labs’ Social Equity and Educational Development (SEED) initiative is designed to provide the skills, knowledge and opportunity for all members of society to work and own businesses in the burgeoning cannabis industry. SEED is the largest such program in the country, aimed at ensuring that this new industry reflects the diversity of the communities it will serve. This commitment to social equity will help to create jobs and economic opportunities for all.
About Columbia Care
Columbia Care is one of the largest and most experienced providers of cannabis products and related services in the United States and Europe. The company has licenses in 18 jurisdictions across the two continents. Columbia Care is known for its high-quality products and its commitment to customer service. The company’s products are available in a variety of formats, including oils, tinctures, capsules, and topical solutions. Columbia Care also offers a wide range of services, including education and consultation, product development, and manufacturing.
Columbia Care is one of the largest providers of medical cannabis in the United States. The company operates 131 facilities, including 99 dispensaries and 32 cultivation and manufacturing facilities. Columbia Care also has a presence in the adult-use market, delivering industry-leading products and services.
Columbia Care launched Cannabist in 2021, a new retail brand that offers products spanning flower, edibles, oils and tablets. The company’s proprietary technology platforms create a national dispensary network. Popular brands include Seed & Strain, Triple Seven, gLeaf, Classix, Press, Amber and Platinum Label CBD.