The acquisition agreement between southern Colorado dispensary chain Strawberry Fields and Schwazze, a publicly traded marijuana conglomerate formerly known as Medicine Man Technologies, has been terminated.
Before transitioning to Schwazze (a term that describes defoliation during marijuana cultivation), Medicine Man Technologies had agreed to purchase Strawberry Fields, a dispensary chain with four dispensaries in Downieville, Pueblo and Trinidad, for $31 million in cash and MMT stock. The deal was announced last September, and Strawberry Fields co-owners and brothers Mike and Rich Kwesell were going to stay on after the merger, set to take place by May 31.
"Colorado is the most competitive cannabis market in the world, and to know we will have the support from other successful business teams and efficient operators all pulling in the same direction is quite significant," Mike Kwesell said after the agreement was announced.
But last month Schwazze filed paperwork to terminate the agreement with the Securities and Exchange Commission after a request from Strawberry Fields. According to Rich Kwesell, the decision to walk away wasn't related to the economic recession brought on by COVID-19; he adds that Strawberry Fields plans to stay independent "for the near future," but has other plans in the works.
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"We have great respect for all of the companies [Schwazze is] rolling up, and we are looking forward to doing good business with their organization as first-class operators, same as everyone in the licensed industry," Rich Kwesell explains. "Our team has major developments coming into fruition and new products being released. It’s not the right time for us."
Strawberry Fields was one of many planned acquisitions announced during Schwazze's busy 2019, which saw the company agree to purchase well over thirty dispensaries, including Colorado Harvest Company, Medicine Man, Mesa Organics, Roots Rx and Starbuds stores, as well as several marijuana growing and infused-product businesses.
Schwazze CEO Justine Dye told Westword that all planned acquisitions were still in place on April 20, the day that the first deal, a takeover of Mesa Organics dispensaries and Purplebees Extracts, was finalized.
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But Schwazze confirms that it learned of Strawberry Fields' plans to terminate its agreement with the company that same day. "On April 24, the Company submitted an SEC filing which included information that the binding term sheet with cannabis operator Strawberry Fields had ended effective April 20. We will continue to evaluate all opportunities as we move forward with our acquisition strategy, and we remain confident in the organic and inorganic opportunities that are ahead of us," a statement from the company reads.
According to Dye, all other acquisitions remain on track.
"With our inaugural transaction with Mesa Organics complete — during a global pandemic, nonetheless — we are optimistic we will continue to make significant progress," Dye says. "Pending the closing of our remaining planned acquisitions, we will have thirty dispensaries, twelve cultivation sites and four manufacturing facilities. Our next step will be to continue finalizing these acquisitions and building on our strong operating model that has enabled Schwazze and its partners to meet the needs of customers across the state, especially as demand for cannabis has increased."
Update: This story was updated on May 21 to correct an error stating Strawberry Fields filed SEC paperwork to terminate the acquisition agreement; Schwazze was the entity that filed the paperwork.