No Deal: Cresco Labs, Columbia Care Call Off $2-Billion Merger

Unforeseen changes to the cannabis industry that have unfolded in the past 16 months are being blamed for an unsuccessful merger between two of the biggest players in the space.

Chicago-based Cresco Labs announced July 31 that it terminated its roughly $2-billion agreement to acquire all of the issued and outstanding shares of fellow industry bigwig Columbia Care amidst an evolving landscape in the cannabis industry. The M&A deal was first announced in March 2022.

Cresco Labs CEO and co-founder Charles Bachtell said in a press release Monday morning the termination was a mutual decision between the companies, but New York-based Columbia Care did not issue a public statement specific to the deal to coincide with Cresco’s statement.

Editor's note: Columbia Care published a duplicate of the Cresco press release on its website after this article was published.

Bachtell said he believes the decision is in the best long-term interest of Cresco Labs and its shareholders and thanked Columbia Care for its collaboration and dedication during the attempted transaction, which was originally expected to close in the fourth quarter of 2022. The companies mutually extended their agreement in February 2023 with a June 30 deadline to close, but they failed to hit that target, too.

RELATED: Where the Cresco-Columbia Care Merger Stands on Deadline Day

“Moving forward, we remain committed to our Year of the Core strategy, which involves the swift restructuring of low-margin operations, improving competitiveness and driving efficiencies in markets where we maintain leading market share, and scaling operations to prepare for growth catalysts in emerging markets,” Bachtell said in the July 31 release. “A strong core will enable us to take advantage of the margin accretive, growth opportunities we foresee within this tough economic time for the cannabis industry. While this is not the outcome we originally hoped for, we are confident Cresco Labs is in a stronger position moving forward.”

The potential for the transaction to close remained elusive throughout the 16-month effort without Cresco and Columbia Care able to successfully navigate the necessary divestitures to obtain regulatory approval for the deal. Specifically, the MSOs needed to sell off assets in certain states where they have overlapping footprints in order to remain compliant in limited-license markets, such as New York, Illinois and Massachusetts.

The two companies announced an $185-million divestiture agreement in November 2022 with Sean “Diddy” Combs, where an entity owned and controlled by the American rapper would acquire certain vertically integrated assets owned by Cresco and Columbia Care in those states. But this deal was also terminated, effective July 28, leading up to the overarching M&A termination between the companies.

Columbia Care CEO and co-founder Nicholas Vita said in the July 31 Cresco Labs press release that, after “careful consideration,” he and his company are confident that the mutual decision to move forward as separate, standalone companies is in the best interests of each, and that includes Columbia Care’s employees, customers and shareholders.

“Over the last 16 months we have reviewed every aspect of our business, remained decisive and have made substantive changes that significantly improved our operations—positioning us with significant strategic and operational strength at this inflection point in the company’s history,” Vita said. “We are looking forward to realizing the benefits of these changes as well as focusing on the opportunities in our outstanding footprint in markets with embedded upside; diversified portfolio of brands; our award-winning national retail brand, The Cannabist; recently implemented operational and organizational efficiencies; proactive balance sheet management activities; and meaningful equity capital markets initiatives that will propel Columbia Care into one of the most profitable and resilient companies in the industry over the next several years.”

Separately, Columbia Care issued a press release announcing corporate actions taken during the past 16 months to accelerate the company’s operational efficiencies and flow generation, but the release to not specifically mention Cresco Labs or the failed merger.

Cresco Labs and Columbia Care are among the eight largest cannabis MSOs in the nation that remained focused on expanding in select markets they forecast have long-term potential. Below are where the two companies are focusing their expansion efforts in 2023.

Cresco Labs Going Heavy on Florida, Pennsylvania Retail Growth

Columbia Care to Redeploy Capital, Enhance Liquidity