Colorado Marijuana Takeovers Still Planned Amid Economic Dip

Courtesy of The Green Solution
The Green Solution in Glenwood Springs.
The economic downfall from coronavirus won't stop two major marijuana takeovers in Colorado, according to companies involved in the mergers.

Currently the largest dispensary chain in the state, the Green Solution agreed to be purchased by publicly traded company Columbia Care Inc. last November for $140 million ($110 million in Columbia Care stock, $15 million in cash and $15 million in senior loans). Columbia Care wouldn't be the largest new dispensary owner in the state for long, though: In 2019, Medicine Man Technologies, a public, Denver-based cannabis company, agreed to buy more than thirty dispensaries throughout Colorado, as well as several cultivation, extraction and infused-product businesses.

But neither of the deals, which combined would place over fifty dispensaries under new ownership, was set to become official until 2020, and neither was consummated before coronavirus struck the country's economy and stock market.

Both Columbia Care and Medicine Man Technologies plan to compensate their acquisition targets with much more stock in their respective companies than actual cash, but since last November, Medicine Man Technologies stock has fallen around 60 percent, and Columbia Care stock dropped nearly 40 percent.

Concerns over the economy have not quashed any of Medicine Man Technologies' agreements, according to spokeswoman Raquel Fuentes. And Chief Executive Officer Justin Dye went into more detail during a quarterly earnings statement with shareholders on March 30:

“Despite these unique challenges, we continue to be optimistic and confident that 2020 is poised to be a historic year for our company, employees, shareholders, communities and, above all, customers," he said. "We remain on schedule to close the eleven pending acquisitions, which will enable us to become one of the largest vertically integrated seed-to-sale operators in the global cannabis industry based on revenue."

If every deal goes through, Medicine Man Technologies would own all three metro Colorado Harvest Company dispensaries, five Starbuds locations statewide, and mountain dispensary chain Roots RX's six dispensaries. Medicine Man Technologies also has plans in place to buy over ten more stores through the acquisition of southern Colorado chains Mesa Organics and Strawberry Fields, as well as announced deals to acquire two Colorado hash brands, one of the largest outdoor cannabis-growing operations in the country, and Medically Correct, the parent company of Incredibles edibles.

"We believe that the company is uniquely positioned to be a winner as the cannabis industry experiences consolidation," Dye added.

Columbia Care Chief Executive Officer Nicholas Vita was also confident during the company's most recent earnings call with shareholders, excited at the thought of joining "the second-largest cannabis market in the world." However, this call was made on March 10, three days before President Donald Trump declared the coronavirus pandemic a national emergency.

"Our guidance did not include, obviously, any effect of [coronavirus]." Vita said during the call. In an April 2 email sent to Westword, a spokesperson for the Green Solution says the merger with Columbia Care is still on track.

One reason for the company's optimism? A new wholesale venture, according to Chief Operating Officer David Hart. "We're opportunistically looking at 2020, to take advantage not only of a retail opportunity, but for the fist time, wholesale. The Green Solution had a very successful outdoor harvest late in 2019. Based on what we see from the supply-demand perspective in Colorado, there's still going to be a shortage from the supply perspective, so I think the Green Solution is well positioned to take advantage of that."

However, Vita went on to call Colorado a "highly fragmented" market, so coronavirus-related closures in the state's marijuana industry could lead to even more consolidation down the road.

Update: Strawberry Fields terminated its acquisition agreement with Medicine Man Technologies in April, according to both parties.