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Marijuana multistate operators Columbia Care and Cresco Labs have “mutually agreed” to extend the companies’ acquisition closing date timeline from March 31 to June 30 of this year.
It’s the second such extension, which underscores the complexities of closing a large deal at a time when other acquisitions have been called off amid widespread layoffs and tight funding in the cannabis industry.
Columbia Care, one of NJ’s first and largest cannabis dispensaries with locations in Vineland and Deptford, just got a lot bigger after a merger with Cresco Labs, an Illinois-based multi-state cannabis behemoth.
NJ regulators approved the merger by a 4:1 vote last week.
It’s a curious development for Columbia Care, a company that sells America’s most expensive medical cannabis here in New Jersey. Columbia Care also has a track record in other states that clashes with the oft-repeated equity goals of NJ’s cannabis regulators.
New Jersey’s governor is teaming up with a coalition of major cannabis brands to launch a campaign meant to educate and encourage consumers about the risks of buying marijuana products outside of regulated markets.
The U.S. Cannabis Council (USCC) is leading the “Buy Legal” effort, which was announced on Thursday in New Orleans at the Black CannaBiz Expo.
Cresco Labs is expected to sell off $250 million-$500 million worth of marijuana cultivation and retail licenses largely to meet state license limits as part of its planned $2 billion acquisition of rival Columbia Care.
Company executives told analysts that Chicago-based multistate operator Cresco “will likely” divest assets in Florida, Illinois, Massachusetts, New York and Ohio because of overlapping operations with New York-headquartered Columbia Care in limited-license markets.
Back in 2019, many marijuana industry experts trumpeted Illinois as setting a new bar for social equity: State lawmakers created a potential blueprint to provide greater opportunities for minority entrepreneurs in Illinois’ new recreational cannabis industry.
But three years later, the social equity program is still struggling to get off the ground, in part because of lawsuits and the COVID-19 pandemic.
At issue is a bill that would allow craft growers to nearly triple the size of their footprint from 5,000 square feet to 14,000 square feet, according to a report by Grown In, an industry newsletter.
The Cannabis Business Association of Illinois formally decided at a board meeting last week to oppose the legislation, SB3105, according to Grown In.
The association is dominated by MSOs such as Illinois-based Cresco Labs, PharmaCann and Verano Holdings, Grown In reported.
U.S. marijuana multistate operators reported banner revenue growth in the first three months of this year, boosted by good execution and strong consumer demand in established and newer markets.
Many reported double-digit revenue growth in the first quarter of 2021 versus the fourth quarter of 2020 and, in several cases, staggering year-over-year growth.
Gross profit margins improved for most MSOs, ranging from Illinois-based operators Green Thumb Industries and Cresco Labs to smaller operators like TerrAscend and Ascend Wellness.
But not all MSOs are doing well.
This month just might be the best time in a long time to buy cannabis stocks. Why? Much of the initial excitement about the increased prospects of significant U.S. cannabis reform has waned. With the Biden administration focused on other priorities, some investors could even be despairing that anything will be done.
Simon Malinowski, managing attorney of cannabis-focused law firm Harris Bricken’s New York office, wrote in a blog post that the language of the bill makes it clear lawmakers wanted to discourage anti-competitive behaviors.
“The legislature’s motivation for prohibiting vertical integration is woven into the language of the MRTA: to provide industry newcomers – especially social and economic equity applicants — a better chance to thrive, while also preventing monopolies,” he wrote.
Exceptions to the Rule
Increasingly, a group of larger companies known as multistate operators, or MSOs, dominate the industry. While still small compared with, say, liquor companies, the largest MSOs have dozens of stores and hundreds of millions in annual revenue. Leading MSOs such as Curaleaf, Cresco Labs, and Columbia Care have raised money by going public in Canada.