Chicago-based cannabis companies Cresco Labs and Columbia Care have announced the cancellation of their planned $2 billion megamerger. The decision comes as a result of changing market conditions, including falling stock prices, tightening credit, and stagnant industry sales. The proposed merger aimed to create the second-largest cannabis retailer in the United States, projecting annual sales of over $1.4 billion.
Both companies’ stock prices have witnessed significant declines since the merger was announced. Additionally, the cannabis credit market has tightened, posing challenges for companies seeking funding. The industry’s complex financial landscape is further complicated by the fact that cannabis remains a federally-controlled substance.
Presently, Cresco Labs operates in 10 states, boasting 14 production facilities and 68 dispensaries. On the other hand, Columbia Care is among the largest multistate cannabis companies in the US, with 94 dispensaries and 32 cultivation facilities. As part of required antitrust divestitures, the companies had previously revealed a $185 million deal to sell cannabis facilities to rapper/producer Sean “Diddy” Combs. However, this arrangement has now been terminated along with the megamerger.
While Cresco Labs achieved record revenue of $843 million last year, the company has struggled to generate profits. Despite this, the state of Illinois, where Cresco Labs operates, legalized recreational marijuana in January 2020 and has consistently ranked third in the nation for total sales. Nevertheless, sales in Illinois have recently started to plateau following a rapid increase in previous years. Currently, the state boasts 138 licensed recreational cannabis dispensaries.
The Bib Theorists will continue to monitor the evolving cannabis industry and provide updates on the latest developments in the sector.
