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BANKING
Cresco Labs and Columbia Care divest in three markets to Sean "Diddy" Combs
by Staff Writers
Chicago IL (SPX) Nov 07, 2022

The proposed acquisition by Sean "Diddy" Combs will create the largest Black owned business in cannabis. (Photo Credit: Revolt Media)

Cresco Labs (CSE:CL) (OTCQX:CRLBF), a vertically integrated multi-state operator and the No. 1 U.S. wholesaler of branded cannabis, and Columbia Care, has announced the signing of definitive agreements to divest certain New York, Illinois, and Massachusetts assets (the "Assets") to an entity owned and controlled by Sean "Diddy" Combs (the "Transaction"). The divestiture of the Assets is required for Cresco to close its previously announced acquisition of Columbia Care (the "Columbia Care Acquisition"). The Transaction is expected to close concurrently with the closing of the Columbia Care Acquisition. Total consideration for the Transaction is an amount up to US$185,000,000 (the "Purchase Price").

The Transaction is Combs' first investment in cannabis, the fastest growing industry in the U.S., and upon closing, will create the country's first minority-owned and operated, vertically integrated multi-state operator. This industry-changing transaction is rooted in Cresco's vision to develop the most responsible, respectable and robust industry possible, and advances Combs' mission to open new doors in emerging industries for Black entrepreneurs and other diverse founders who are underrepresented and underserved.

Throughout his legendary career, Combs has solidified himself as one of the most successful business leaders and cultural icons. Establishing an unrivaled track record for breaking new ground and redefining industries, he has built a portfolio of leading global brands across music, entertainment, spirits, fashion, and media. Combs has also maintained a deep commitment to philanthropy, with a focus on empowerment through education and entrepreneurship, and community activism.

These vertically integrated New York, Illinois, and Massachusetts assets provide Combs the ability to grow and manufacture cannabis products; wholesale, and distribute those branded products to licensed dispensaries in major metropolitan areas like New York City, Boston, and Chicago; and operate retail stores in all three states.

"The announcement is bigger than the Transaction - and it couldn't come at a time of greater significance and momentum. We've seen executive power exercised to address matters of cannabis injustice, we're seeing bi-partisan support for elements of federal reform, and we're seeing some of the largest and most influential states in the country launch cannabis programs prioritizing social responsibility - this announcement adds to that momentum," said Charles Bachtell, Cresco Labs' CEO.

"For Cresco, the transaction is a major step towards closing the Columbia Care acquisition and our leadership position in one of the largest consumer products categories of the future. For an industry in need of greater diversity of leadership and perspective, the substantial presence of a minority-owned operator in some of the most influential markets in the country being led by one of the most prolific and impactful entrepreneurs of our time is momentous...and incredibly exciting. We're thrilled to welcome Sean and his team to the industry."

"My mission has always been to create opportunities for Black entrepreneurs in industries where we've traditionally been denied access, and this acquisition provides the immediate scale and impact needed to create a more equitable future in cannabis," said Sean "Diddy" Combs, Chairman and CEO Combs Enterprises. "Owning the entire process - from growing and manufacturing to marketing, retail, and wholesale distribution - is a historic win for the culture that will allow us to empower diverse leaders throughout the ecosystem and be bold advocates for inclusion."

Columbia Care CEO and Co-founder, Nicholas Vita, added, "These assets offer the Combs' team significant market presence, enabling them to make the most impact on the industry as a whole. It's been clear to us that Sean has the right team to carry on the strong legacy of these Columbia Care and Cresco Labs facilities, and we can't wait to see how he helps shape the cannabis industry going forward through his entrepreneurial leadership and innovation."

Terms of Transaction
The buyer entities will purchase certain Cresco and Columbia Care assets in New York, Illinois, and Massachusetts. A portion of the Purchase Price would be payable upon closing of the Transaction, subject to adjustments contained in the definitive agreements, and will be comprised of approximately US$110,000,000 in cash and approximately US$45,000,000 of seller notes. The remaining portion of the Purchase Price would be payable post-closing upon achievement of certain short-term, objective, and market-based milestones. The following combination of Cresco ("CL") and Columbia Care ("CC") assets will be divested in the Transaction:

+ New York: Brooklyn (CC), Manhattan (CC), New Hartford (CL), and Rochester (CC) retail assets and Rochester (CC) production asset.

+ Massachusetts: Greenfield (CC), Worcester (CL), and Leicester (CL) retail assets and Leicester (CL) production asset.

+ Illinois: Chicago - Jefferson Park (CC) and Villa Park (CC) retail assets and Aurora (CC) production asset.

The closing of the Transaction is subject to certain closing conditions in the definitive agreements, including the receipt of all required regulatory approvals; clearance under the Hart-Scott-Rodino Antitrust Improvements Act; and the closing of the Columbia Care Acquisition.

Cresco and Columbia Care are in the process of divesting other assets to meet regulatory requirements ahead of closing the Columbia Care Acquisition. Additional announcements regarding those divestitures will be forthcoming. The Company is working through regulatory reviews and approvals to close the Columbia Care Acquisition as soon as possible which is now expected to be around the end of the first quarter of 2023.

Tarik Brooks, who serves on Cresco's Board of Directors (the "Board") and as the President of Combs Enterprises, recused himself from Cresco's review and approval of the Transaction. In accordance with the Company's policies, the Transaction was reviewed and approved by an independent committee of the Board as well as all disinterested Board members. The Board received certain financial advisory services from A.G.P/Alliance Global Partners in connection with its consideration of the Transaction. Columbia Care's Board of Directors also approved the Transaction.

Financial and Legal Advisors
Stoic Advisory Inc. and Solidum Capital Advisors are acting as financial advisor to Cresco Labs. Paul Hastings LLP is acting as US legal advisor to Cresco Labs.

ATB Capital Markets and Gramercy Capital Group, LLC (through INTE Securities LLC, member FINRA/SIPC), are acting as financial advisor to Columbia Care. Foley Hoag LLP is acting as US legal advisor to Columbia Care.

Evercore and Empowerment IP Capital are acting as financial advisor to Combs. Goodwin Proctor is acting as US legal advisor to Combs.


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