Cannabis producer Cresco nears $2 bln purchase of Columbia Care - sources

Cresco Labs

23/03/2022 01:34

By Shariq Khan
    March 22 (Reuters) - U.S. cannabis producer Cresco Labs Inc
 CL.CD  is in advanced talks to buy rival Columbia Care Inc
 CCHW.NLB  for around $2 billion, three people familiar with the
matter said on Tuesday.
    If a deal is finalised it would be one of the largest in the
U.S. cannabis industry to date. The industry, still in its
infancy, continues to operate in a regulatory environment
defined by a patchwork of laws that vary from state to state.
    A deal could be announced as soon as Wednesday, the sources
said. Exact terms of the deal could not be learnt.
    The people cautioned that talks could still fall apart and
highlighted that the companies have overlapping footprints in
multiple states, including in the key New York market, and could
require significant divestitures - a possible hurdle in reaching
an agreement.
    The sources requested anonymity as the discussions were
confidential.
    Cresco Labs and Columbia Care did not respond to multiple
requests for comment.
    Cannabis sales in the United States have been booming and
are forecast to reach $46 billion by 2026, according to industry
research firm BDSA, as states like New York and New Jersey open
up.
    Still, margins and profits remain thin and analysts and
investors have called for consolidation to improve profitability
by finding savings in scale.
    The AdvisorShares Pure U.S. Cannabis exchange-traded fund
 MSOS.P  has lost 19% of its value so far this year.
    Columbia Care stock has risen about 9% this year but it is
down almost 70% since it started trading in 2019. Cresco Labs
shares have slumped 63% from a 2021 peak.
    Both companies are listed in Canada and trade
over-the-counter in the United States as marijuana remains
illegal at the federal level, and the two large U.S. stock
exchanges cannot allow companies that grow or sell the plant to
list their shares.
    Cresco is scheduled to report its fourth-quarter financials
on Wednesday, while Columbia Care last week postponed its
earnings to Thursday.

 (Reporting by Shariq Khan in Bengaluru; Editing by Kenneth
Maxwell)
 ((Shariq.Khan@thomsonreuters.com; Twitter: @shariqrtrs;))