Cresco buys Massachusetts cannabis cultivation company for $90 million with additional profit potential – New Cannabis Ventures


Cresco Labs Gains Leadership Position in Massachusetts Through Acquisition of Cultivate

Upon completion of the planned expansions, the combined operation will include 100,000 square feet of active canopy, 3 adult dispensaries and 3 medical dispensaries, the maximum allowable for cultivation and retail within the state

CHICAGO – March 18, 2021 – (BUSINESS WIRE) –Cresco Laboratories (CSE:CL) (OTCQX:CRLBF) (“Cresco Labs” or “the Company”), one of the largest vertically integrated, multi-state cannabis operators in the United States, today announced it has entered into a definitive agreement to acquire 100% of the outstanding equity interests in Cultivate Licensing LLC and BL Real Estate LLC (collectively, “Cultivate”), a vertically integrated Massachusetts operator, for an upfront payment of $90 million plus an earn-out of up to $68 million (the “Transaction”) . The transaction is expected to close in the fourth quarter of 2021.

At the precipice of a transformative moment in U.S. cannabis, now is the time to expand our leadership position in the country’s largest and most important markets. This acquisition immediately places Cresco Labs in a top 3 stock position in Massachusetts, the third $1B+ cannabis market in which we have achieved this status.

Charles Bachtell, CEO of Cresco Labs.

“We continue to demonstrate our ability to operate and make value-added investments to accelerate growth. Cultivate has been a pioneer and operational excellence since the early days of the Massachusetts market. Like us, the Cultivate team is focused on growing premium flowers, offering a full range of branded products, providing the best retail customer experience and elevating the cannabis industry to a new level of professionalism and social responsibility.” Mr. Bachtell continued, “This will also be the fourth state where we operate the maximum number of retail stores. Once again, we look forward to executing our playbook and demonstrating the growth and leverage that can be achieved by delving deeper into strategic states. At a time of industry change, we are deliberately cementing our leadership position as the most important company in the cannabis space.”

Cultivating Highlights:

  • Approximately 42,000 square feet of flowering canopy.
  • Planned indoor expansion of approximately 20,000 square feet of additional flowering canopy.
  • Premium floral and edible offerings in addition to well-known private label concentrates and medicines.
  • Two operating pharmacies in Leicester and Framingham.
  • Third pharmacy in Worcester, expected to open in the second quarter of 2021.

Massachusetts Market Highlights:

  • fifteenth most populous state in the USA with 6.9 million inhabitants1.
  • Nearly $1 billion in total retail sales in 2020, including a robust medical program expansion and despite a 6-week drop in sales due to COVID-19 restrictions in the adult market
  • $83.4 million in adult sales in the 4 weeks ended 3/7/21 – the largest 4-week total to date
  • Second highest gram price in US markets for adult use
  • Strong margin profile achievable through vertical integration and wholesale focus.
  • Restricted market and largest market for adult use in the Northeast.

conditions

The maximum consideration for the Transaction is one hundred and fifty-eight million dollars (US$158,000,000) (the “Purchase Price”), which corresponds to an implied EV/2021 EBITDA multiple of 4.0x to 4.5x, depending on achieved earnout milestones . The transaction will close on a cashless and debt-free basis with a mutually agreed target normalized working capital level.

A portion of the purchase price would be payable upon closing of the transaction, subject to adjustments and holdback agreements contained in the Definitive Agreement, and consists of:

  • Fifteen million dollars (US$15,000,000) in cash (the “Cash Amount”); and
  • Shares of Cresco (“Cresco Shares”) having an aggregate value of seventy-five million dollars (US$75,000,000) based on the ten (10) consecutive volume weighted average closing price of Cresco shares on the Canadian Securities Exchange Dealing was reported Period of day ending on the Dealing Day immediately preceding the date of execution of the Definitive Agreement.

The remaining portion of the purchase price will be structured as an earnout based on the achievement of certain 2021 EBITDA thresholds, up to sixty-eight million dollars (US$68,000,000). An amount equal to approximately 12.5% ​​of all Earnout Payments earned by the Seller is payable in cash. The remaining portion of any earnout payments earned will be settled through the issuance of Cresco stock.

Approximately 68% of the Cresco Shares to be issued to the Vendor upon closing of the Transaction or upon achievement of Earnout, if any, will be subject to the following lockup restrictions: Such Cresco Shares will be divided into three (3) equal installments beginning with 1/ 3 of Cresco Shares being released on each of the following dates: (i) four (4) months after the Closing Date or the end of the Earnout Period, as applicable; (ii) eight (8) months after the Closing Date or the end of the Earnout Period, as the case may be; and (iii) twelve (12) months after the Closing Date or the end of the Earnout Period, as applicable.

The transaction is subject, among other things, to approval and receipt of all required CSE, regulatory and court approvals, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act.

About Cresco Labs

Cresco Labs is one of the largest vertically integrated, multi-state cannabis operators in the United States with a mission to normalize and professionalize the cannabis industry. Cresco Labs follows a consumer goods (“CPG”) approach and is the largest wholesaler of branded cannabis products in the United States. Designed to meet the needs of all consumer segments, its brands include some of the most recognized and trusted brands including Cresco, Remedi, High Supply, Cresco Reserve, Good News, Wonder Wellness, FloraCal Farms and Mindy’s Chef Led Artisanal Edibles created by the James Beard Award-winning chef Mindy Segal. Cresco Labs’ national pharmacy brand, Sunnyside, is a wellness-focused retailer founded to build trust, education and convenience for existing and new cannabis consumers. Aware that the cannabis industry is poised to become one of the country’s leading job creators, Cresco Labs operates the industry’s largest social equity and educational development initiative, SEED, which was founded to ensure all members of society have the skills Possibility to work and own businesses in the cannabis industry. Learn more about Cresco Labs at CrescoLabs.com.

Original press release

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Published by NCV Newswire

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