Cresco Labs took a significant step toward finalizing plans to absorb Columbia Care, when it announced a deal for hip hop producer and artist Sean “Diddy” Combs to acquire businesses in three of the five states in which Cresco must divest from in order for the acquisition to not violate state license caps.
With a purchase price of $185 million, the initial terms of the deal include Combs paying $110 million in cash, and assuming $45 million in debt, according to a press release from Cresco. Any payments beyond that would occur post-closing and would be conditional based on undisclosed “market-based milestones.”
The president of Combs Enterprises, Tarik Brooks, also happens to serve on Cresco’s Board of Directors. Brooks has worked for Combs Enterprises for almost five years. Cresco announced on April 22, 2021 that Brooks had joined their Board, less than a year before Brooks had ascended to the role of President of Combs Enterprises.
The deal with Combs Enterprises represents a large part of the divestment Cresco must line up in order to complete the larger transaction for Columbia Care, relieving Cresco of assets in Illinois, Massachusetts, and New York that would have been in excess of state license caps.
Cresco announced on March 23 that it would be acquiring fellow-MSO Columbia Care in a $2 billion dollar deal that will potentially leave Cresco as one of the largest cannabis companies in the country. The deal also includes a stock swap that would leave 35% of Cresco’s outstanding shares in the hands of Columbia Care shareholders.
The purchase of Columbia Care gives Cresco entry to markets in Missouri, Utah, Arizona, California, Colorado, and Florida. On the other hand, it also includes assets in New York, Massachusetts, Ohio, Florida, and Illinois where Cresco has already hit the license cap for retail and in some cases production. This means redundant businesses will have to be unloaded in order to complete the transaction, especially since state regulators have to approve changes in ownership for cannabis businesses.
The majority of assets that Combs Enterprises will gain are currently owned by Columbia Care, with a heavy slant toward medical cannabis. Every New York business in the deal is medical only, two of the Massachusetts dispensaries are medical/adult use hybrids, as is one of the two Illinois retail acquisitions. Only two dispensaries in the total deal are exclusively adult use.
Of those operations, Combs Enterprises will acquire dispensaries in major markets, including Brooklyn, Manhattan, Chicago, and Worcester, Massachusetts.
Aside from the deal with Combs Enterprises, Cresco Labs will still have to sell off at least five dispensaries in Ohio and figure out what to do with an extra medical license in Florida.
A spokesperson from Combs Enterprises declined to comment, while spokespeople from Cresco did not respond to emailed requests for comment by publication.