Debra Borchardt
Cresco Labs (OTCQX:CRLBF) said it was buying Massachusetts-based Cultivate Licensing LLC and BL Real Estate LLC for roughly $90 million, plus an earnout of up to $68 million. The deal is expected to close in the fourth quarter of 2021.
“At the precipice of a transformational moment in U.S. cannabis, now is the time to further our leadership in the country’s largest and most important markets. Through this acquisition, Cresco Labs will immediately vault to a top 3 share position in Massachusetts, the third $1B+ cannabis market where we’ve achieved this status,” said Charles Bachtell, CEO of Cresco Labs.
Cultivate brings to Cresco approximately 42,000 sq. ft. of flowering canopy with a planned indoor expansion of approximately 20,000 sq. ft. The company has two operational dispensaries in Leicester and Framingham and a third dispensary in Worcester is expected to open in the second quarter of 2021.
Terms Of The Deal
The deal consists of $15,000,000 in cash and shares of Cresco having an aggregate value equal to $75 million. The remaining portion is structured as an earnout based on the achievement of certain EBITDA target thresholds in 2021, up to $68 million. An amount equal to approximately 12.5% of any earnout payments earned by seller shall be paid in cash. The remaining portion of any earned earnout payments shall be satisfied via the issuance of Cresco shares.
Massachusetts delivered nearly $1 billion in total retail sales in 2020, including the robust expansion of the medical program and despite 6 weeks of lost sales due to COVID-19 restrictions on the adult-use market. $83.4M in adult-use sales for the 4 weeks ending 3/7/21 was the largest 4 week total to date. It is the second-highest per-gram pricing within U.S. adult-use markets and a strong margin profile achievable through vertical integration and emphasis on wholesale. Currently, it is a supply-constrained market and the largest adult-use market in the North East.
“We continue to demonstrate our ability to execute operationally and make accretive investments to accelerate growth. Cultivate has been a trailblazer and an operational standout since the early days of the Massachusetts market. Like us, the Cultivate team is focused on growing premium flower, offering a full suite of branded products, delivering the best customer experience at retail, and elevating the cannabis industry to a new level of professionalism and social responsibility.” Mr. Bachtell continued, “This will also mark the fourth state in which we operate the maximum number of retail stores. Once again, we look forward to executing our playbook and demonstrating the growth and leverage that can be achieved by going deeper in strategic states. At a period of industry inflection, we are cementing our leadership in a deliberate manner as the most important company in cannabis.”
