Med­men to ac­quire Phar­maCann for $682-mil­lion

Mar­i­juana player’s takeover takes aim at U.S. mar­ket

Stockwatch Daily - - FRONT PAGE - Mr. Adam Bier­man re­ports

MED­MEN En­ter­prises Inc. and Chicago-based Phar­maCann LLC have signed a bind­ing let­ter of in­tent for Med­men to ac­quire Phar­maCann in an all-stock trans­ac­tion val­ued at $682-mil­lion.

The re­sult­ing pro forma com­pany (in­clud­ing pend­ing ac­qui­si­tions by Med­men) will have a port­fo­lio of cannabis li­cences in 12 states that will per­mit the com­bined com­pany to op­er­ate 79 cannabis fa­cil­i­ties. The com­bined com­pany will op­er­ate in 12 states, which com prise a to tal es­ti­mated ad­dress­able mar­ket, as of 2030, of ap­prox­i­mately $40-bil­lion ac­cord­ing to Cowen Group. Through the

trans­ac­tion, Med­men will add li­cences in Illi­nois, New York, Penn­syl­va­nia, Mary­land, Mass­a­chu­setts, Ohio, Vir­ginia and Michi­gan.

“This is a trans­for­ma­tive ac­qui­si­tion that will cre­ate the largest U.S. cannabis com­pany in the world’s largest cannabis mar­ket,” said Adam Bier­man, Med­men’s chief ex­ec­u­tive of­fi­cer and co-founder. “The trans­ac­tion adds tremen­dous scale to our ver­ti­cally in­te­grated busi­ness model by ex­pand­ing our U.S. re­tail foot­print across im­por­tant growth mar­kets while strength­en­ing our cul­ti­va­tion and pro­duc­tion ca­pa­bil­i­ties. With the rev­enue syn­er­gies that the deal is ex­pected to pro­duce, Med­men is well po­si­tioned to con­tinue ex­e­cut­ing on our growth strat­egy. This would not have been pos­si­ble even two years ago and is a tes­ta­ment to how far both the in­dus­try and these two com­pa­nies have evolved. Phar­maCann’s lead­er­ship has built a world-class or­ga­ni­za­tion, and we are ex­cited about the value this trans­ac­tion is cre­at­ing for share­hold­ers.”

Founded in 2014, Phar­maCann is one of the largest med­i­cal cannabis providers in the United States. It cur­rently op­er­ates 10 re­tail stores and three cul­ti­va­tion and pro­duc­tion fa­cil­i­ties across mul­ti­ple states, in­clud­ing New York, Mary­land and Mass­a­chu­setts, and in Illi­nois, where it is the largest holder of med­i­cal cannabis li­cences. The com­pany also owns li­censes for re­tail stores in Penn­syl­va­nia, Mary­land, Mass­a­chu­setts, Ohio, Vir­ginia and Michi­gan, and cul­ti­va­tion and pro­duc­tion li­cences in all of its mar­kets, ex­clud­ing Mary­land. Phar­maCann is known for its high-qual­ity cul­ti­va­tion and pro­duc­tion, and has one of the best records in the in­dus­try for cannabis li­cence ap­pli­ca­tions.

“Phar­maCann has built highly ef­fi­cient cul­ti­va­tion cen­tres and dis­pen­saries to pro­mote a bet­ter qual­ity of life for med­i­cal mar­i­juana pa­tients,” said Dr. Teddy Scott, PhD, Phar­maCann chief ex­ec­u­tive of­fi­cer. “This ac­qui­si­tion val­i­dates the ded­i­ca­tion and level of so­phis­ti­ca­tion we have used to pro­vide con­sis­tent pa­tient out­comes. I am proud­est of the top-notch team we have as­sem­bled here and their ded­i­ca­tion to our mis­sion of serv­ing med­i­cal mar­i­juana pa­tients. Our or­ga­ni­za­tion is a nat­u­ral fit for Med­men, and we are ex­cited to join a lead­ing en­ter­prise with a best-in-class man­age­ment team.”

Phar­maCann is li­censed for 18 re­tail stores in eight states and eight cul­ti­va­tion and pro­duc­tion fa­cil­i­ties in seven states. Com­bined, the two com­pa­nies will be li­censed for 66 re­tail stores and 13 cul­ti­va­tion and pro­duc­tion fa­cil­i­ties (in­clud­ing pend­ing ac­qui­si­tions by Med­men).

Trans­ac­tion de­tails

Based on the clos­ing price of the com­pany’s Class B sub­or­di­nate vot­ing shares as of Oct. 9, the to­tal trans­ac­tion is val­ued at $682-mil­lion and will be sat­is­fied by the is­suance of Class B sub­or­di­nated vot­ing shares of the com­pany. Un­der the terms of the agree­ment, Phar­maCann hold­ers will own

ap­prox­i­mately 25 per cent of the fully di­luted shares of the com­pany upon clos­ing and will be sub­ject to lock-up agree­ments for a pe­riod of six to 12 months.

The board of di­rec­tors of both Med­men and Phar­maCann have unan­i­mously ap­proved the trans­ac­tion.

We seek Safe Har­bor.

Erika Flores con­densed this news re­lease (erikaf@stock­watch.com).

(MMEN) Shares: 28,775,175

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