Cresco Labs (CL.CD) and Columbia Care Inc. (CCHW.NLB) have mutually terminated their planned $2 billion merger, which was announced in March of the previous year, according to a joint statement released Monday.
Charles Bachtell, CEO of Cresco Labs, stated that the termination was made in the long-term interest of Cresco Labs and its shareholders, considering the evolving landscape of the cannabis industry.
The proposed merger had been viewed as a strategic move to capitalize on the expected growth in the U.S. marijuana industry, with executives optimistic that the combined entity could reach the status of major brands like Coca-Cola or Johnnie Walker. It was believed that this merger would enable them to dominate a market projected to be worth $46 billion by 2026, reports Reuters.
However, both companies faced significant challenges in the evolving cannabis landscape. A regional banking crisis earlier in the year severely limited the availability of funding. Additionally, with marijuana still illegal at the federal level, access to traditional financial services is limited.
Regulatory hurdles also played a role in the decision to terminate the merger. Cresco and Columbia struggled to complete the necessary divestitures required to secure regulatory approvals for the deal, a critical step in compliance with antitrust regulations to prevent potential monopolistic practices.
The companies clarified that there would be no penalties or fees related to the termination of the merger agreement. In addition to the main merger deal, both companies also canceled a separate agreement with Sean “Diddy” Combs, the hip-hop mogul, which would have involved the acquisition of specific divested operations in New York, Massachusetts, and Illinois for a potential sum of up to $185 million.