In a deal that represents the largest investment made by a single investor in a publicly-traded cannabis company, MedMen has announced a $250 million investment from global cannabis investor, Gotham Green.
The investment will be in the form of convertible senior secured notes totaling up to $250 million on a private placement basis. The notes will be issued in three tranches, with the initial tranche being $100 million, and the following two tranches being $75 million each. The second tranche will be available to the company on the six month anniversary of the closing date, and Tranche III will be available at the six-month mark of the closing of Tranche II.
“This strategic partnership with Gotham Green Partners represents another key milestone for MedMen and stems from our long-standing relationship with The Cronos Group and GGP’s brand portfolio,” said Adam Bierman, CEO of MedMen.
The company plans to use the capital to fund future capital needs of the business as well as:
- Operationalize existing retail licenses, particularly Florida, where the company is licensed for 30 stores.
- Integrate assets acquired through pending transactions, including those related to PharmaCann, LLC.
- Accelerate geographic expansion through bolt-on acquisitions and investments in core markets.
- To fund the national roll-out of higher-margin, in-house branded products.
- Continue to invest in technology and digital infrastructure, with a focus on delivery and loyalty programs.
- Consolidate the supply chain, and enhance margins by accelerating cultivation and developing production capabilities.
A Month of Records
March has been a month of record-breaking deals for the cannabis sector. Only weeks ago, Harvest Health & Recreation (Harvest Health), one of the largest vertically integrated cannabis companies in the U.S., announced it had acquired Verano Holdings, one of the largest privately-held multi-state, vertically integrated licensed operators of U.S. cannabis facilities, for approximately $850 million.
The deal, which is the largest U.S. cannabis consolidation in history, will result in a company that is one of the largest multi-state operations in the country as measured by licenses held and facilities permitted, totaling up to 200 facilities in 16 states, including 123 retail dispensaries.
Once the deal is complete, the resulting company will be operating eight cultivation facilities, seven manufacturing facilities, and 30 dispensaries, with expectations that by the end of 2019 the company will have expanded to 13 cultivation sites, 13 operating manufacturing facilities, and more than 70 dispensaries, with continued growth into 2020.
It seems that the floodgates opened in August of last year, when Global alcohol giant Constellation Brands, the $42 billion name behind Corona and Modelo beers, made a game-changing announcement, stating that it is investing a further $4 billion in publicly traded Canadian marijuana grower Canopy Growth.
At the time, an investment of that size in the marijuana industry was seen as bound to re-shape how investors view the asset class, which Constellation Brands CEO Rob Sands described as “potentially the most significant global growth opportunity for the next decade.”
Deals of this scale are indicative that the legal cannabis industry is indeed a viable and serious investment channel, and are flags signaling a future of greater numbers of consolidations and expansions. And with this war chest, MedMen can be an early mover.
“We continue to be impressed with MedMen’s industry-leading retail execution and iconic branding,” said Jason Adler, managing member, Gotham Green Partners. “With MedMen’s fortified balance sheet, the Company’s future has never been brighter. We feel fortunate to have the opportunity to take such a significant stake in MedMen and begin to work actively with the management team and the board to help the Company achieve its goals.”
-Lynda Kiernan