When cannabis MSOs Cresco Labs and Columbia Care announced their $2 billion M&A agreement at the end of March, many in the industry wondered how they would sort out their overlapping cultivation and retail footprints in key markets like New York and Florida, where current regulations would require them to sell off certain licenses and assets for the blockbuster deal to go through.

After more than seven months, Cresco and Columbia Care have moved forward in three of those states, which have some of the most lucrative market potential in the U.S. On Nov. 4, the companies announced they would sell 9 dispensaries and three production facilities in New York, Illinois and Massachusetts to Sean “Diddy” Combs, better known as “Puff Daddy,” a cultural icon to the generation of listeners who grew up with his music in the 1990s and early 2000s. His well-known spirits brand Ciroc Vodka is just one component of Combs Enterprises, which includes fashion, television, music and fragrance brands and investments. The transaction is expected to close at $185 million.

Nick Vita, CEO of Columbia Care, said the decision to sell the licenses, which are a mix of both Columbia Care and Cresco facilities, to Combs in the divestiture process was multifaceted, and Vita called the deal “a massive, massive feather in the industry’s cap.”

“Ultimately, the decision was made that we did not want to go to the usual suspects. We didn’t want to go to another cannabis operator. We wanted to bring in a new entrepreneurial spirit,” Vita told Cannabis Business Times during a call the day the deal was announced Nov. 4. “We really wanted to sort of focus on the concept of diversity and bringing that into cannabis.”

In a press release, the companies said the transaction would create “the first minority-owned and operated, vertically integrated multistate operator,” something that was a focus for the team, according to Vita and Charlie Bachtell, CEO and co-founder of Cresco Labs.

CBT spoke with Vita and Bachtell about how the deal came together, how they are approaching other markets that will require them to divest and what might come next as Cresco Labs and Columbia Care work to make the acquisition final.

Michelle Simakis: Back in March, when the Cresco Labs and Columbia Care acquisition was announced, you noted that divesting some licenses would be a necessity because of license caps and other rules and regulations in the individual state markets. We first saw the news that you would be selling assets in New York, Illinois and Massachusetts in the Wall Street Journal, which reported that Cresco Labs began conversations with Combs Enterprises back in 2018. Can you tell me a little bit about how this came together? How long have you been in active talks with Combs Enterprises about this specific deal, and why did this opportunity make sense now?

Nick Vita, CEO, Columbia Care: It’s a long time coming, and a lot of stars had to align to get it to this point, so we’re very excited about it not only for Columbia Care and Cresco and for Combs Enterprises, but really for the industry. It’s a massive, massive feather in the industry’s cap. We knew there was overlap in certain markets, and together we sat down, and we really thought about the things that mattered most to us in terms of who would be the right buyer for these assets.

When we took a step back, the stars began to align, and it was very clear that Combs Enterprises and Sean Combs built an enterprise that had experience in CPG, had experience in entrepreneurial activities, they are Black-owned, they are incredibly successful, they had built a team of just absolute superstars to help them develop each one of the businesses that they were in. So, there was an overlap from a strategic perspective, there was an overlap from a philosophical perspective, there was an overlap from a tactical perspective. Ultimately, Charlie [Bachtell, co-founder and CEO of Cresco Labs] and I have always agreed on the basic principles [of] how we want our companies to develop and how we wanted to see the industry develop, and this matched perfectly with that. It was well beyond just the financial analysis. It really had to do with the operations, making sure people had the right home and the best home; it was about bringing in new vision and new excitement into the market and about bringing in diversity.

MS: Did you consider waiting to sell your New York assets until there is more clarity on licensing rules and regulations in the adult-use market? Was there a question of whether you’d want to wait and see what would happen there?

NV: We talked about timing, and ultimately, you’ll never find perfect timing. It’s our view that having Combs involved in the regulatory discussions is a critical piece of the puzzle. They are experts in what they do. Building companies is something they are very familiar with, and understanding regulations is something they are very familiar with. For us, whether it was last week or this week or last month or next month, the point is everyone knows the direction New York is going in … the fact is it’s the second largest cannabis market in the world. When it gets off the ground, it’s going to be absolutely bonkers, and having the right sophistication amongst the operators and having another voice at the table is only positive. So for us, we didn’t want to wait for the perfect moment. We wanted to make sure that they were part of the group that developed that perfect moment.

Combs Enterprises purchased three Columbia Care dispensaries in Brooklyn, Manhattan and Rochester, a Cresco Labs dispensary in New Hartford, and a Columbia Care production facility in Rochester as part of the $185 million sale, that also includes assets in Massachusetts and Illinois. 

MS: What was the process of searching for and determining the right buyer like?

NV: We had interest from people within the industry, people from outside of the industry, we had people from within our own organizations, and it was really trying to match those qualifications with the assets. It was funny because there were multiple markets we were thinking about. We had to sort of think about it in a very creative way, and it wasn’t just as simple as “a plus b equals c” … it was about what do we want that outcome to look like? What do we want the impact to be upon the industry, because Cresco and Columbia Care are creating the global leader in cannabis. We want to make sure the very first minority-owned, Black-owned multistate operator had sort of the pick of the litter and the cream of the crop, and I think we accomplished that. (Editor’s Note: Viola Brands is a Black-owned MSO, and vertically integrated in Michigan.) There are other assets that are going to be disposed of and sold, and I would say that the quality of the organizations we’re talking to, they may not be as well known but they are very, very high quality and again, we weren’t reliant upon industry players to get this across the finish line. There were a number of organizations that had the type of, not equivalent, but had extraordinary credibility and were sort of involved in the process, and still are because there are assets we haven’t yet announced the sale for. So, it’s been a really fascinating exercise, but it’s been really atypical from the standpoint of a merger conversation and a disposition of assets because there’s a very deep rooted and philosophical alignment on who we wanted to choose to run these assets and who those people were relative to the markets they would be serving.

MS: You alluded to this earlier, but how did you land on New York, Illinois and Massachusetts for Combs Enterprises? Were other markets where divesting is required considered?

NV: You’ve got a historical association with the East Coast with Combs Enterprises. He’s originally from the East Coast, so if there is anyone who is going to be the face of New York, it really should be him. That was an easy one because that is a market that is waiting for this type of profile and is going through the regulatory development [and] evolutionary process, and I think his impact and his team’s impact on that process could be profoundly positive. But that’s a new market; it’s a high-growth and up-and-coming market. Illinois, on the other hand, is a billion dollar-plus market. It’s not mature, but it is maturing …. You have the centers of thought that drive really consensus throughout the country. They are among the leaders, and I think that’s [a] really important fact pattern with this.

We had to reduce the number [of licenses] down to the statutory requirement in New York and Massachusetts, and the rest are in Illinois. It was primarily East Coast driven in terms of exposure to the dispensaries, but it’s a fully integrated and a really high quality platform in Illinois. The teams are very excited about this on the ground.

Columbia Care and Cresco Labs, through a divestiture process required to finalize its M&A deal, sold Massachusetts assets to Sean Combs that included two Cresco Labs dispensaries in Worcester and Leicester, a Columbia Care dispensary in Greenfield, and Cresco Labs production asset in Leicester. 


MS: What kind of relationship will Cresco Labs/Columbia Care have with Combs Enterprises after the sale is finalized?

NV: These markets are very competitive. We will make sure that Combs is as successful as [it] can be and vice-versa. This is a very friendly transaction amongst parties that have deep respect for one another … and all the operators are really trying to make sure that the industry succeeds as a whole. Everybody wants to see Combs succeed.

MS: You mentioned there were a number of companies interested in the assets and considerations you made when selecting who might be the right fit for those sales. Other overlapping footprints exist in Florida, another huge market, Ohio is one, and there are others. Can you share anything about a timeline and when you would like to have the rest of these conflicts resolved so that you can move forward with this deal?

NV: The short answer is I can’t give you a timeline because our expectation[s] and our timelines are built around the larger merger between Columbia Care and Cresco. And we’re building toward the end of the first quarter to make sure that everything is choreographed to hit that milestone or that general timeframe. The other discussions are very, very advanced. It’s at the point where we are looking at the world, and we’re not going to make a decision based on time. We’re going to make a decision based on our described priorities internally, and we’re going to do it right. The only take I can offer up is that I wouldn’t be surprised to see subsequent announcements in the near term and wrap this up, but I also wouldn’t be surprised if there were a couple of markets where we remain silent because we continue to have multiple parties that are sort of going back and forth and trying to position themselves best to be selected for these assets. And as long as it doesn’t encumber our timeline for the Columbia Care and Cresco merger, I think we’re very comfortable being more methodical than reactionary.

MS: Nick noted earlier that you weren’t going to “the usual suspects” when considering buyers in states where your licenses overlap, and the importance of bringing new voices into the industry. Would you say that would be a goal of the future sales as well in Florida, Ohio, and other markets where there are overlapping footprints?

Charlie Bachtell, CEO and co-founder, Cresco Labs: Our collective strategy on how to manage the divestiture process was to put a lot of strategic thought in the front end and really kind of identify groups that would most likely be the types of groups that would be interested in the asset, have the ability to fund it and have a relatively high certainty of close. So, it’s less about whether or not there’s a preference for newer entrants or existing ones. It really comes down to the outline of who is the most likely buyer that can help us achieve our goals and provide that certainty of close. Especially with these three markets, overall where the capital markets are, where the peer set that’s publicly traded are and what the value of the stock is, where cash balances are. For a lot of reasons, we knew early on that some of our public peers likely weren’t in the positions to be the best suited acquirers of these assets. It was going to be companies or entities that had access to either private capital or were otherwise financeable. And who would have a strong interest in getting into these states where we had assets. It was less about new organizations, and more about the profile of who is the most likely buyer to be able to close the transactions on our terms.

Sean Combs also purchased two Columbia Care retail assets in Jefferson Park and Villa Park and a Columbia Care production facility in Aurora as part of the $185 million deal that included locations in Massachusetts and New York. 

MS: One of the last major New York acquisitions was RIV Capital’s acquisition of medical cannabis company Etain, which operates cultivation, production and four dispensaries for $247 million this past spring. I know this isn’t an apples-to-apples comparison, but could you put the $185 million into context, how did you come to an agreement on the valuation of these licenses considering these three states have some of the most lucrative market potential?

CB: When you look at these three assets in particular, I wouldn’t say that it was broken down necessarily state by state, maybe in very loose terms. I could tell you that New York had the highest value. It wasn’t an exact science, it wasn’t an exact number assigned to it, but that was the one that had the highest value.

NV:  When I mentioned the fact that Combs was a successful entrepreneur and could move the needle from a regulatory perspective, that is very important because guess who the largest operator in the sector in New York is going to be, as soon as this combination closes? It’s going to be Cresco. So, Cresco, when I think about the strategic value of, yes, a dollar in your hand today is important. But if you can have $100 in your hand a year from now because the regulations are developed in a rational way, or you have a sophisticated operating market with very good competitors, that’s the way our organizations have thought about it. We’re not just trying to solve a simple problem. We’re trying to solve a complicated series of problems, and that’s why for Combs especially, they bring so much … to the table. All things considered, if you just look at it from a simple valuation basis, I think the valuation was very attractive. I think the structure was very attractive for both parties, but ultimately, I think we gain a lot more by doing what we did than by trying to find an industry player that could pay the highest dollar possible. Ultimately, we need Combs to succeed. We need the industry to succeed, and we need New York to succeed.

Editor’s Note: This interview was edited for length, style and clarity.


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