Tilray Acquires Majority Position in Amended MedMen Convertible Notes

The investment provides Tilray a potential accelerated path into the U.S. cannabis market upon federal legalization.

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NEW YORK & LOS ANGELES--(BUSINESS WIRE)--PRESS RELEASE--Tilray, Inc., a global cannabis-lifestyle and consumer packaged goods company, and MedMen Enterprises Inc., an American cannabis retailer, have announced that Tilray has acquired the majority of the outstanding senior secured convertible notes of MedMen that were originally held by certain funds affiliated with Gotham Green Partners, LLC and other funds. The acquisition provides Tilray with a path, subject to necessary regulatory approvals, to obtain a significant equity position in MedMen through conversion of the notes and exercise of associated warrants following U.S. cannabis legalization (or Tilray’s waiver of such condition). In connection with the sale of the notes, MedMen and GGP amended the restrictive covenants and extended the debt maturity to 2028 to provide MedMen the flexibility to execute on its growth priorities and explore additional strategic opportunities. In addition, MedMen has separately announced a significant equity investment from a private placement of MedMen Shares (as defined below) and warrants to a group of investors.

MedMen is a cannabis retail brand in the U.S., holding 21 licenses and 25 retail locations across key urban centers, including the Bay Area, Los Angeles, Boston, Chicago and Las Vegas, and a significant position in California, the world’s largest market. Prior to U.S. federal legalization of cannabis, and subject to compliance with applicable laws and stock exchange rules, MedMen will actively explore opportunities to expand MedMen’s footprint across international markets.

Irwin D. Simon, Tilray’s chairman and CEO, said, “Backed by accelerating trends towards legalization globally, we are focused on building the world's leading cannabis-focused consumer branded company with a goal of $4 billion of revenue by the end of our fiscal 2024. The investment we are announcing in MedMen securities today, one of the most recognized brands in the $80 billion U.S. cannabis market, is a critical step towards delivering on our objective as we work to enable Tilray to lead the U.S. market when legalization allows.”

Simon continued, “Our ability to maximize value from this game-changing transaction rests on the support of our shareholders at the upcoming Special Meeting to vote on our Authorized Shares Proposal, which will increase the number of authorized shares Tilray has available to not only complete this transaction, but also to execute on other strategic acquisitions. I cannot stress enough the importance of making our shareholders’ voices count to enable us to maximize our potential to create substantial value for our shareholders in the near-term and in the future.”

Tom Lynch, MedMen’s chairman and CEO, added, “Our management team has spent the past 18 months executing a disciplined turnaround plan. We are grateful to our stakeholders for their patience and support as we worked to fix the business and rebuild trust and credibility. We believe that patience has paid off, as these efforts have succeeded in attracting partners who share our vision for building the world’s most powerful cannabis retail brand. In addition, the proceeds from the private placement and amendments to the notes, gives MedMen the cash and flexibility to match our revenue trajectory to our operational expertise and internationally renowned brand. MedMen 2.0 is here, and we are thrilled to embark on the next stage of our journey.”

Transaction Overview

Under the terms of the transaction, a newly formed limited partnership established by Tilray and other strategic investors acquired an aggregate principal amount of approximately U.S. $165.8 million of the notes and the warrants, all of which were originally issued by MedMen and held by GGP, representing 75% of the outstanding notes and 65% of the outstanding warrants. Tilray’s interest in the SPV represents rights to 68% of the notes and related warrants held by the SPV, which are convertible into, and exercisable for, approximately 21% of the outstanding Class B subordinate voting shares of MedMen upon closing of the transaction. Tilray’s ability to convert the notes and exercise the warrants is dependent upon U.S. federal legalization of cannabis or Tilray’s waiver of such requirement as well as any additional regulatory approvals. As consideration for Tilray’s interest in the notes and warrants, and subject to Tilray receiving the stockholder approval necessary to increase the number of shares of its authorized capital stock, Tilray will issue approximately 9.0 million shares of its common stock to GGP; provided, however, that if Tilray has not received the stockholder approval by Dec. 1, 2021, GGP may elect to receive cash rather than Tilray shares. Tilray’s previously scheduled Special Meeting of Stockholders will be held this Thursday, Aug.19, 2021. MedMen did not receive any proceeds from the transfer of the notes.

In connection with the transactions, the parties agreed to amend and restate the facility governing the notes to, among other things, extend the maturity date to Aug. 16, 2028, eliminate any cash interest obligations and instead provide for pay-in-kind interest, eliminate certain repricing provisions, and eliminate and revise certain restrictive covenants. Accrued pay-in-kind interest on the notes will be convertible at price equal to the trailing 30-day volume weighted average price of the MedMen Shares, as and when such pay-in-kind interest becomes due and payable, subject to the maximum permitted discount under the rules of the Canadian Securities Exchange. The notes held by holders on the date of the amendment and restatement may not be prepaid by MedMen until legalization of the general cultivation, distribution and possession of marijuana at the federal level in the United States or the removal of the regulation of such activities from the U.S. federal laws. Any such prepayment shall require at least six months’ notice. If notes are transferred following the date of the amendment and restatement, such notes may not be prepaid until the earlier of the third anniversary of the effective date or 90 days following the transfer of such notes to such holders. Transfers of notes will be permitted subject only to notice and compliance with securities laws. The notes will also provide the holders of the notes with a top-up right to acquire additional MedMen Shares and a pre-emptive right with respect to future financings of the company, subject to certain exceptions, upon the issuance by MedMen of certain equity or equity-linked securities. No changes have been made to the conversion and exercise prices of the notes or related warrants.