In a surprising twist for the cannabis industry, Cresco Labs and Columbia Care have agreed to terminate their previously planned $2 billion merger.
The ambitious deal, first announced in March 2022, would have created the largest cannabis company in the US.
The Chicago-based Cresco Labs intended to purchase New York’s Columbia Care in an all-stock transaction.
However, the deal fell apart when the companies failed to divest enough assets to meet regulatory approval by the June 30 deadline.
Cresco Labs’ CEO, Charles Bachtell, said that the decision was made in the best interest of the company and its shareholders, in light of the evolving cannabis industry landscape.
Despite Cresco’s market capitalisation dropping to around $700 million, down from $2.7 billion when the deal was announced, Bachtell affirmed their commitment to core business growth strategies.
Additionally, the companies terminated a $185 million deal with hip-hop mogul Sean “Diddy” Combs to acquire some divested operations in New York, Massachusetts, and Illinois.
Columbia Care, with a market cap of about $200 million, also remains optimistic. CEO Nicholas Vita believes the decision to continue independently is the best path forward.
Columbia Care recently announced the completion of a corporate restructuring plan, which included a 52-person headcount reduction, and the closure of its Downtown Los Angeles facility.
The termination comes at a time when the cannabis industry is facing economic and regulatory challenges.
With federal regulation and banking reform lacking, the industry has seen a downturn, as operators struggle to scale their businesses.
However, Senate Majority Leader Chuck Schumer signalled it may pass this autumn.
Despite the regulatory challenges and a drying up of investment money, both Cresco Labs and Columbia Care remain optimistic about the future.
As the cannabis industry continues to evolve, the focus for these companies is to stay adaptable and resilient in the face of uncertainty.
