Cresco and Columbia Care merger go up in smoke – Cannabis | weed | marijuana

A $2 billion merger between Cresco Labs and Columbia Care is in smoke a year after the companies announced the acquisition.

Had the merger gone through, it would have created the largest cannabis company in the United States.

This was due to the lack of banking reform at federal level.

“Given the evolving landscape in the cannabis industry, we believe the decision to complete the proposed transaction is in the long-term interests of Cresco Labs and our shareholders,” Cresco CEO Charles Bachtell said in a statement.

The canceled agreement was mutual, the companies say. Neither party pays penalties or cancellation fees.

Cresco and Columbia Care-Fusion go up in smoke

Chicago-based Cresco’s plan to buy New York-based Columbia Care went up in smoke last week.

It began when both companies failed to sell enough assets for regulatory approvals by June 30.

Cresco’s market cap is around $700 million, compared to $2.7 billion in March 2022 when the companies first announced the merger. Columbia Care has a market cap of $200 million.

As the merger with Cresco Columbia Care goes up in smoke, the companies are also announcing a $185 million deal with Sean “Diddy” Combs.

Government inaction is to blame. To support the growth of the industry, the Secure and Fair Enforcement Banking Act (SAFE Banking Act) is required.

SAFE Banking would give cannabis entrepreneurs access to credit and other banking services. It would also allow them to deduct business expenses from their gross income.

Last year, for the seventh time (third this year), Congress failed to pass banking reform.

Cresco and Columbia Care-Fusion go up in smoke

That the merger between Cresco and Columbia Care goes up in smoke comes as little surprise to many analysts. The deadline for closing the deal had already been pushed back twice, most recently in June.

As previously noted, Cresco’s CEO blames the “evolving landscape” of the cannabis industry.

But “devolving” might have been a better word.

Columbia Care has already laid off 25% of its employees this year. And the capital markets weren’t friendly to cannabis in 2023.

Add to that high interest rates, lack of reform in Washington, central bank inflation, plummeting wholesale cannabis prices, and low stock prices—it’s cannabis carnage.

The fact that the merger agreement between Cresco and Columbia Care went up in smoke is another building block in the wall.

And the stock market reflects this.

Cresco Lab shares have fallen from $6.50 to $1.50. During the same period, Columbia Care shares fell from $3.10 to $0.40.

Of course, these stocks fell after news that the Cresco-Columbia Care merger went up in smoke. Analysts expect both companies to recover.

What’s next?

Now that the merger with Cresco Columbia Care has gone up in smoke… what next?

Cresco Labs will focus on “rapidly restructuring low-margin operations, improving competitiveness and increasing efficiencies in markets where we hold leading market share, and scaling operations in preparation for growth catalysts in emerging markets,” it said in a statement the company.

Columbia Care will continue with its corporate restructuring plan, including the completion of the sale of a 36,000-square-foot cultivation facility in downtown Los Angeles.

“With the uncertainty of the last 16 months behind us and the enthusiasm and energy that comes with moments of renewal, our team welcomes the next phase of Columbia Care’s growth and expansion,” said Nicholas Vita, CEO of Columbia Care. in a statement.