Cannabis producer Cresco to fork out $2bn for Columbia Care

Cannabis producer Cresco Labs said on Wednesday it would buy rival Columbia Care in a $2bn  all-stock deal, creating the largest US cannabis company by sales.

The buyout, one of the biggest in the sector’s history, would make Cresco the dominant player in a market projected to reach $46bn in sales by 2026 thanks to the legalisation of marijuana in states such as New York and New Jersey.

Columbia Care investors will receive 0.5579 shares of Cresco Labs for each unit held. Based on Cresco’s Tuesday close, this represents a price of C$4.57 for each share of Columbia Care, or nearly a 16% premium.

The deal values Columbia Care’s equity at C$1.36bn ($1.07bn).

Informed sources have said the buyout will require significant divestiture as the companies’ footprints overlap in states such as New York where only 10 firms have cannabis licences.

The companies said nothing about this in their statements. They are both listed in Canada and trade over the counter in the US as marijuana remains illegal at federal level. The two large US stock exchanges may not list companies that grow or sell the weed.

Cresco said it expects annual pro-forma revenue of more than $100m in eight states by 2023. It posted fourth-quarter revenue of $218m on Wednesday, missing analysts’ average estimate of $234.7m,  according to Refinitiv data.

Reuters