Sean ‘Diddy’ Combs acquires assets to create the largest black-owned cannabis company

Entertainment mogul Sean “Diddy” Combs announced Friday that he is launching what is reportedly the largest black-owned cannabis brand in the world with a $185 million purchase of existing licensed marijuana operations in three states. Combs is acquiring the operations of Cresco Labs and Columbia Care, two multi-state cannabis companies that are required to divest assets to complete a previously announced merger of the two companies.

The transaction, if approved by state and federal regulators, would expand Combs’ portfolio of businesses, which includes businesses in entertainment, media, fashion and liquor. Combs, the chairman and CEO of Combs Enterprises, said he’s buying the assets to address inequalities in the cannabis industry, where 81% of the companies are white-owned, according to a legislative report released this week in Maryland.

Many Black entrepreneurs have said that funding difficulties make it difficult for all but deep-rooted business owners to succeed in the cannabis industry. The barriers to accessing the legal market follow decades of marijuana prohibition, which has seen blacks and browns disproportionately arrested and imprisoned for cannabis crimes.

“It’s devilish,” Combs told the Wall Street Journal. “How do you lock down communities of people, shatter their family structure, their future, and then legalize it and make sure those same people don’t get a chance to benefit or revitalize their lives?”

“My mission has always been to create opportunities for black entrepreneurs in industries where we have traditionally been denied access, and this acquisition provides the immediate scale and impact needed to create a more equitable future for cannabis,” Combs said in a statement. “Owning the entire process – from growing and manufacturing to marketing, retail and wholesale – is a historic asset to the culture that will enable us to empower diverse leaders across the ecosystem and be bold advocates for inclusion. “

$185 million deal

As part of the transaction, a new Combs-controlled company will acquire nine retail cannabis stores and three manufacturing facilities in New York, Illinois and Massachusetts. In exchange, Combs will pay $110 million in cash and an additional $45 million in debt financing and future payments based on growth benchmarks for a total of up to $185 million. Combs said he will use the new company to increase black participation in the cannabis industry, a goal endorsed by Cresco CEO Charlie Bachtell.

“For an industry in need of a greater diversity of leadership and perspectives, the strong presence of a minority-owned operator in some of the country’s most influential markets, led by one of the most prolific and influential entrepreneurs of our time, is significant … and incredible exciting,” Bachtell said in a statement on Friday. “We are very excited to welcome Sean and his team to the industry.”

In March, Cresco Labs announced it would acquire Columbia Care in a $2 billion stock transaction. The merger of the two companies creates one of the largest cannabis companies in the United States, operating in 18 legal cannabis states, including early adopters Colorado and California. But regulations governing the cannabis industry and business licenses require companies to dispose of some assets in states where their operations overlap, such as Arizona, Florida, Illinois, Massachusetts, New York and Ohio.

Bachtell said the deal with Combs is bigger than the transaction itself, “and it couldn’t come at a time of greater significance and momentum.”

“We’ve seen executive power wielded to address issues of cannabis injustice, we’re seeing bipartisan support for elements of federal reform, and we’re seeing some of the largest and most influential states in the country launch cannabis programs that prioritize social responsibility — this announcement adds to that momentum,” Bachtell said. “For Cresco, the transaction is an important step in completing the Columbia Care acquisition and our leadership position in one of the largest consumer goods categories of the future.”

Largest black-owned cannabis company

The transaction is Combs’ first venture in the cannabis industry and will create the first vertically integrated, minority-owned and operated cannabis operator in the United States, in a sector expected to grow to $72 billion by 2030. Vertically integrated operations in New York, Illinois and Massachusetts will provide Combs’ new company with the ability to grow and manufacture cannabis products, while wholesale and distribution facilities will market these branded products to licensed dispensaries in major metropolitan areas such as New York City, Boston and Chicago. The deal also includes retail stores in all three states.

“These assets provide the Combs team with significant market presence and enable them to make the greatest impact on the industry as a whole,” said Nicholas Vita, CEO and co-founder of Columbia Care. “We knew Sean had the right team to continue the strong legacy of these Columbia Care and Cresco Labs facilities, and we can’t wait to see his entrepreneurial leadership and innovation help shape the cannabis industry of the future.”

The transaction is subject to several conditions, including regulatory approval, antitrust clearance and the closing of Cresco Labs’ acquisition of Columbia Care. The companies are also in the process of divesting other assets to meet regulatory requirements prior to closing of the transaction.