LOS ANGELES CA, October 11 ( Dr Cyberspace ) — by Robert Bishop — Los Angeles-based Cannabis Industry MedMen, founded in 2010, and a multistate marijuana operator, has halted its acquisition of PharmaCann. MedMen states that it was a mutual decision to terminate between it and PharmaCann.
When the acquisition was announced it was the largest in U.S. cannabis industry history at $682 million for an all-stock-deal.
Capital markets in both the U.S. and Canadian cannabis industries have tumbled since March 2019. In light of market developments Madmen has decided to focus on building its retail operations in California and other states.
Still, the decision to terminate the deal surprised industry observers since both companies had already complied with their antitrust obligations. Not only had they complied but they issued a press release full of optimism for the deal’s prospects.
“We understand the need to pivot in a rapidly evolving industry, but this announcement comes as a surprise to us, particularly given the timing of the HSR expiry press release issued less than a month ago, which consisted of optimistic management commentary in regards to the deal’s prospects,” wrote Vivien Azer, an analyst at New York-based Cowen.
Cannabis Industry Medmen To Leverage Brand
MedMen decided to focus on leveraging the Company’s retail brand, its leadership position in California, and its digital platform. In the end, MedMen decided growing the business to create greater shareholder value was more important than completing the Transaction.
In a news release, MedMen said they made the move to “deepen” their presence in their “core” retail markets in California, Florida, Illinois, Massachusetts, Nevada and New York.
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“The cannabis sector has evolved tremendously since we first announced the PharmaCann transaction and based on the current macro-environment and future opportunities that exist for our business, we believe it is now in the best interest of our shareholders to deepen, rather than widen, our company’s reach,” said Adam Bierman, MedMen co-founder and CEO.
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PharmaCann, LLC, will now pay termination fees to MedMen through the transfer of three entity licenses in Illinois and Virginia.
The three entities are holding the following four assets:
- Retail license for Greater Chicago, Illinois
- Operation Cultivation and production facility in Hillcrest, Illinois
- Retail location in Evanston, Illinois
- License for vertically integrated facility in Virginia
MedMen will be licensed in four retail locations in Greater Chicago, in addition to the existing location in Oak Park, Illinois. The Company owns one cannabis cultivation and production license in Illinois.
MedMen will be positioned to have total control of its supply chain once recreational marijuana sales commence in January 2020. Meanwhile, for the past six months, MedMen has been focused on California.
With about 76% of California cities still banning recreational cannabis MedMen sees significant upside for cannabis operators.
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As jurisdictions within the state start recreational marijuana sales MedMen is acquiring them and now has licenses for 17 stores. MedMen plans to have 30 stores in California by the end of 2020.
MedMen is traded on the Canadian Securities Exchange (CSE: MMEN).
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