Cannabis firm Medmen settles
Company that accused buyer Ascend of pay-to-play to sell N.Y. operation for $88M
Medmen, a cannabis company licensed for medical sales in New York, will settle its legal battle with the competitor seeking to buy its operations in the state — gaining more cash, but losing nearly all its equity — foregoing a trial that may have relied on evidence gathered from subpoenas of Gov. Kathy Hochul’s administration.
Medmen had refused to close a previously agreed-upon deal with Ascend Wellness Holdings in December, leading the rival multistate cannabis company to file a civil complaint against Medmen. Medmen countersued Ascend, alleging the latter had exerted “political pressure and undue influence” on state regulators and the executive branch during the deal’s approval process.
Ascend had donated at least $15,000 to the governor’s political campaign, and paid large sums to lobbying firm Dickinson & Avella to advance its interests in New York. But its executives claimed Medmen had “knowingly fabricated a narrative” questioning the legitimacy of its efforts to gain regulatory approvals, and pointed to Medmen’s own large donations to the campaign of Gov. Andrew M. Cuomo in 2018.
Politicians frequently deny that donations influence their decision-making, but companies with interests before the state routinely give to campaign accounts of relevant lawmakers, seeking access beyond the conversations made possible by hiring lobbyists.
Under the settlement announced Wednesday, Ascend will acquire nearly 100 percent of Medmen’s New York assets, up from the 86.7 percent they agreed to purchase before the state’s cannabis law took effect last spring.
The price tag went up, too: instead of the original $73 million, Ascend expects to pay $88 million after closing the deal for $74 million and paying an additional $14 million once it makes its first recreational sale out of a former Medmen dispensary.
Medmen’s four dispensaries in Manhattan, Long Island, Syracuse and Buffalo can only sell to medically certified patients. But the state’s 2021 cannabis law established a pathway for licensed medical retailers to enter the recreational marijuana market. They could hold a prized position, as they are expected to be the only seed-tosale businesses permitted in the state’s recreational-use market: nonmedical providers will be barred from vertical integration.
“We have had one goal since the beginning of this process: entering the New York market so we can help patients in New York improve their lives through cannabis,” said Abner Kurtin, founder and chief executive officer of Ascend. “We are excited that we will finally be able to start serving New York’s patients in the coming weeks.”
New York will be the seventh state where Ascend’s cannabis products are sold. Its plans for the state include the establishment of new retail and cultivation facilities; prior to the court battle, it had already invested in the expansion of Medmen’s existing cultivation facility in Utica.
Medmen did not indicate whether the documents they subpoenaed had affirmed any of their allegations against Ascend. Board Chair Michael Serruya — who was serving as interim chief executive when the company first moved to scuttle the deal — presented the settlement as a win for shareholders.
“The company will receive $15 million in additional value,” Serruya said in a news release. “This resolution enables Medmen to move forward with plans to significantly restructure its balance sheet, reduce debt, and focus on its core markets.”
The $88 million deal is significantly less than recent sales of Medmen’s New York medical cannabis peers Columbia Care and Etain. But Medmen’s initial agreement with Ascend took shape before Cuomo had signed the state’s marijuana legalization bill into law.
Though on the cusp of a robust recreational market, the state’s medical cannabis industry remains diminutive compared to other large states, with ten licensed providers currently allowed to operate only four dispensaries each.