Cresco Labs, one of the largest cannabis operators in the United States, announced Wednesday that it had reached an agreement to acquire Columbia Care for roughly $2 billion in a deal that will make it the country’s largest multi-state cannabis operator.
Charles Bachtell, CEO of Cresco Labs, said in a statement that the “combination of Cresco Labs and Columbia Care accelerates our journey to become the leader in cannabis in a way no other potential transaction could.”
“We are incredibly excited to announce this transformative transaction today at a very important time in the development of this industry. This acquisition brings together two of the leading operators in the industry, pairing a leading footprint with proven operational, brand and competitive excellence,” Bachtell said. “The combination is highly complementary and provides unmatched scale, depth, diversification and long-term growth. On a pro-forma basis, the combined Company will be the largest cannabis company by revenue, the number one wholesaler of branded cannabis products, and the largest nationwide retail footprint outside of Florida.”
“We look forward to welcoming the incredible Columbia Care team to the Cresco Labs family. I couldn’t be more excited about this enhanced platform and how it furthers the Cresco Labs Vision — to be the most important and impactful company in cannabis,” he added.
Nicholas Vita, CEO of Columbia Care, said the merger was guided by his company’s founding mission “to deliver the best outcome for our stakeholders.”
Columbia Care is “one of the largest and most experienced cultivators, manufacturers and providers of cannabis products and related services, with licenses in 18 U.S. jurisdictions and the EU,” according to the press release from the companies on Wednesday.
“In an evolving industry, the opportunities to better achieve our mission through consolidation led us to this historic moment,” Vita said in a statement on Wednesday. “With Columbia Care’s strategic national footprint in the most attractive markets and Cresco Labs’ success in execution and incredibly popular brands, we will together create the most important — and the most investable — company in cannabis. Getting to know Charlie, his team, and the culture at Cresco Labs has given me a high level of confidence in the ability to successfully integrate Columbia Care and maximize the tremendous value of the combined footprint.” Per Marketwatch, “shares of Cresco Labs fell 6%, while Columbia Care stock rose 1.3%” following the announcement of the deal on Wednesday.
The still-burgeoning cannabis industry in the United States is already lucrative, but some market analysts have indicated that mergers like this one will be necessary for companies to maximize profitability.
Owen Bennett, an analyst with Jeffries, told Marketwatch that he gives Cresco a “buy” rating.
“We see the combination creating a clear industry leader,” Bennett said. “The combined company will have scale across most key states, industry leading brands and wholesale across these states, and much improved margin profile.”
In creating the largest multi-state cannabis operator, the merger gives Cresco “the largest pro-forma revenue in cannabis today at over $1.4 billion,” the company said.
The company said it will also now have more than 130 retail stores across 18 different markets, making it the second largest retail footprint in the industry.
And the company will now have the top share position in four markets –– Illinois, Pennsylvania, Colorado and Virginia –– the second largest share in Massachusetts and a “pathway to a top-3 position” in New York, New Jersey and Florida.
“The combined company will have a meaningful presence in today’s most influential markets,” the company said in its press release on Wednesday, “and those with the biggest tailwinds for growth and adult use upside including”: New York, New Jersey, Virginia, Pennsylvania, Ohio, Maryland and Florida.