Tilray Makes Move Into US Cannabis Market Via Medmen Convertible Notes

It appears that the rumours surrounding Tilray’s (NASDAQ: TLRY) focus on the US cannabis market were true. The firm this evening announced that it has acquired a majority stake in outstanding MedMen Enterprises (CSE: MMEN) senior secured convertible notes.

Originally owned by Gotham Green Partners, the notes and associated warrants have now been acquired by Tilray as it turns its focus to the US marketplace. Ownership of the notes is to occur via a limited partnership that has been established with “other strategic investors,” which is believed to include Serruya Private Equity based on a concurrent release by Medmen.

In total, the strategic partnership is to acquire US$165.8 million of the notes and warrants, which reportedly amounts to 75% of the outstanding notes and 65% of the outstanding warrants of Medmen. Tilray’s interest in the notes amounts to 68% ownership in the limited partnership, which reportedly reflects a 21% stake in Medmen on an as-converted basis.

Tilray’s portion of the partnership is to be paid for via the issuance of 9.0 million common shares to GGP, provided shareholders approve of certain measures at its special meeting of shareholders. If not approved, Tilray will be forced to make a cash payment for its stake.

The notes acquired by the partnership were subsequently extended to 2028.

Concurrently to Tilray’s announcement, it was announced by Medmen this evening that it has received a US$100 million investment by a group of investors lead by that of Serruya Private Equity. The investment will see shares of the issuer sold at a price of US$0.24 per unit, with each unit consisting of one Class B subordinate voting share and one quarter of a share purchase warrant, which contains an exercise price of US$0.288 and an expiry of five years. Certain investors however will receive a quarter of a warrant that contains an exercise price of US$0.24, and an expiry of December 31, 2021, upon payment of US$30.0 million in notes at par.

Michael Serruya was also appointed to the firms board of directors.

Medmen currently holds a total of 21 licenses and 25 retail locations in several US cannabis markets, including Massachusetts, California, Illinois, and Nevada. Notably, Canaccord earlier this year reiterated a $0.00 price target on the firm.

Tilray last traded at $16.53 on the TSX.

Information for this briefing was found via Sedar, Medmen Enterprises and Tilray. The author has no securities or 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.

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