- M&A
- March 26, 2022
- 3 minutes read
Deal: Cannabis Retailer Cresco Labs To Buy Rival Columbia Care For $2B
There’s a big new deal in an unlikely sector, the cannabis industry. Cresco Labs (CNSX: CL), a publicly-traded medical marijuana…
There’s a big new deal in an unlikely sector, the cannabis industry. Cresco Labs (CNSX: CL), a publicly-traded medical marijuana retailer, has struck a deal to buy Columbia Care (CNSX: CCHW), a rival marijuana retailer.
- Cresco will pay $2bn all with shares to buy Columbia Care and become a more powerful cannabis company. The combined company will become America’s largest cannabis retailer by sales.
- Cresco and Columbia Care are American companies but have their shares listed on the Canadian Securities Exchange. Due to regulatory hurdles, the Canadian markets have been friendlier towards cannabis companies than the US. For one, Canada federally legalized cannabis use in 2018, while it remains federally prohibited in the US but legal according to many states’ laws.
Cresco operates 50 retail stores across seven US states where marijuana is legalized for medical or recreational use, including 16 in Florida alone. It’s a “vertically integrated” cannabis company, denoting it controls the supply chain from cultivation to packaging and selling its products to the end-user. The company brought in $822mn in revenue in 2021, up 73% from the previous year.
Likewise, Columbia Care is a “vertically integrated” cannabis company operating in the US and Europe. It brought in $460mn in revenue in 2021, compared to $180mn in 2020. Combined, Cresco and Columbia Care will have $1.3bn in annual sales, making America’s biggest cannabis retailer.
- The acquisition makes much strategic sense. The cannabis market is growing across the US thanks to an increasing wave of legalization. 18 US states have legalized marijuana for recreational use and 37 for medical use. A combined Cresco-Columbia Care is well-positioned to ride this growth wave.
- Cresco and Columbia Care are growing sales rapidly but racking up significant losses due to expansion costs. Cresco reported a $297mn net loss in 2021 and Columbia Care $147mn in the same year. The business synergies resulting from the merger would help decrease losses. Cresco and Columbia Care compete in many states, so the synergies would be significant.
If all goes as planned, the acquisition will close in this year’s fourth quarter.
