Cresco Labs is purchasing Columbia Care in deal worth $2 billion

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Merger and acquisition activity is driving the future of the cannabis space

Cresco Labs has revealed its intentions to buy Columbia Care for a sum close to $2 billion, considered one of the largest mergers in the cannabis industry so far. The deal will combine Cresco’s marijuana brands with New York-based Columbia Care’s retail footprint. Both have a presence in the largest and fastest-growing cannabis markets, which would make the merger out of this world.

The blending of operations would undoubtedly come to create the nation’s largest multi-state operator by revenue, Cresco CEO Charles Bachtell said in an interview. Bachtell, who will be in charge of running the combined company, said the transaction will expand Cresco’s presence to 17 states plus the District of Columbia, up from ten states. It will also give Chicago-based Cresco the largest market share in key states such as Colorado, Illinois, Pennsylvania, and Virginia.

Cresco’s quest to gain name recognition for three of its major marijuana brands will be enhanced through this joining of forces, which will allow the company to sell products to 70% of the current potential market.

As announced, Columbia Care investors will receive 0.5579 of a subordinate voting share in Cresco for each of their shares. As a result of these estimates, the deal could have an enterprise value of close to $2 billion based on Tuesday’s closing price. That’s a premium of about 16% for Columbia Care shareholders and gives them about 35% of Cresco shares.

The deal, dubbed “Project Jet” by Cresco, has been in the works since earlier this year. The transaction will give Cresco the largest annual revenues in the cannabis industry, at about $1.4 billion, the companies say.

It will also be a key piece in diversifying Cresco’s business, which currently derives more than 80% of its revenue from just three states. Columbia Care, an early player in the medical marijuana markets, will bring a strong presence in states such as Colorado, where Cresco did not previously sell.