Medmen Enterprises (CSE: MMEN) announced this morning that it will be terminating its merger agreement with that of PharmaCann, a multi state operator with operations across six states. Medmen indicating that it was terminating the deal as it did not provide enough shareholder value given current market conditions.
The definitive agreement to merge was initially announced on December 24, 2018, by Medmen and PharmaCann, and had yet to consumate as a result of regulatory hurdles experienced within multiple states. Additionally addled by federal involvement in relation to antitrust issues, the merger was the subject of a second request by the Department of Justice. PharmaCann and Medmen had both announced on September 11, 2019, that the associated waiting period had passed, and thus investors were waiting on the final announcement of the deal closing.
It was originally anticipated that PharmaCann would take in consideration of the transaction 168.4 million shares of Medmen Enterprises. However, the value of those shares has since plummeted as market conditions turned against the sector in general, and concerns arose about excessive spend by members of Medmen management.
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In announcing the termination of the agreement, Medmen stated several justifications for the cancellation of the deal that investors had been waiting to see close, including:
- The HMMJ index being down 47% since initial announcement of the deal, citing capital access issues as a result.
- High capital expenditures to develop PharmaCann assets.
- A renewed focus on California where it wishes to penetrate its market presence on a deeper level.
- The closing timeline for the agreement was significantly impacted by regulatory hurdles, despite receiving the green light from the Department of Justice.
- A focus on current core markets will provide more shareholder value than that of a breadth approach to the market.
As part of the termination of the merger agreement, Medmen has acquired an operational cultivation facility and dispensary in Illinois, along with a second retail license in the state and a license for a vertically integrated facility in Virginia. This is a result of the US$21 million owed to Medmen Enterprises by PharmaCann as a result of a previously issued loan.
In conjunction with the termination of the PharmaCann arrangement, Michael Kramer has been replaced as Chief Financial Officer at Medmen. Chief Corporate Development Officer Zeeshan Hyder will be taking on the role in his place. Kramer will stay on with the firm as a consultant for the remainder of the year.
Medmen Enterprises closed yesterdays session at $2.29.
Information for this briefing was found via Sedar and MedMen Enterprises. The author has no affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
