Tilray Acquires Majority of Debt and Warrants in Cannabis Retailer MedMen
Canadian cannabis producer Tilray Inc. has acquired a majority of the debt and warrants of dispensary chain MedMen in a deal valued at $165.8 million, the company announced today.
As part of the deal, Tilray will acquire 75% of the California-based cannabis retailer’s outstanding secured convertible notes, currently held by Gotham Green Partners, as well as 65% of outstanding warrants. The deal gives Tilray, a publicly traded company on the Toronto Stock Exchange, a potential pathway to ownership of MedMen and access to brick-and-mortar stores in the U.S. market should cannabis be legalized at a federal level.
“Backed by accelerating trends towards legalization globally, we are focused on building the world’s leading cannabis-focused consumer branded company with a goal of $4 billion of revenue by the end of our fiscal 2024,” said Tilray chairman and CEO Irwin Simon in a press release. “The investment we are announcing in MedMen securities today, one of the most recognized brands in the $80 billion U.S. cannabis market, is a critical step towards delivering on our objective as we work to enable Tilray to lead the U.S. market when legalization allows.”
Founded in 2010 by Adam Bierman and Andrew Modlin, MedMen currently operates 25 retail stores across the U.S., including locations in California, Nevada, Massachusetts and Illinois, according to the release, with plans to open five more in the near future. MedMen also provides home delivery services for consumers in select markets. The company, which went public on the Toronto Stock Exchange in 2018, also owns several cannabis cultivation facilities.
Although MedMen has established itself as one of the more recognizable names in cannabis retail, the company has struggled financially in recent months, repeatedly missing revenue projections over the course of multiple earnings reports.
In the release, MedMen chairman and CEO Tom Lynch highlighted the deal’s financial value to the company, noting that the proceeds from the private placement “gives MedMen the cash and flexibility to match our revenue trajectory to our operational expertise and internationally renowned brand.”
“MedMen 2.0 is here, and we are thrilled to embark on the next stage of our journey,’ Lynch said.
With MedMen in its purview, Tilray is set to have a stake in all aspects of the cannabis business in North America, from cultivation to point of sale. In May, Tilray completed a merger with Aphria Inc. in a move to transform the corporation into “the world’s largest cannabis company.” In addition to cultivation, the company produces a number of products including flower, pre-roll, oils, capsules, vapes, edibles, and beverages. Among its portfolio are hemp-based foods producer Manitoba Harvest and cannabis craft brewery SweetWater.
Tilray is also engaged in a joint venture in Canada with Anheuser-Busch InBev to explore non-alcoholic beverages infused with THC and CBD, with each company investing $50 million into the project.
While Tilray has expressed interest in owning MedMen outright, the company is legally prohibited from making an acquisition until cannabis is federally legalized in the U.S., which remains an ongoing battle on Capitol Hill despite support from Senate Majority Leader Chuck Schumer (D-NY). The legal limitations have previously been a hurdle for conglomerates placing early bets on the U.S. market; In 2019, Canada-based Canopy Growth (in which beer conglomerate Constellation Brands is majority shareholder) acquired legal rights to purchase Acreage Holdings, a New York-based company which owns cannabis dispensaries and processing sites across the country.
Editor’s Note 8/19/2021: A previous version of this story inaccurately stated the terms of the transaction. Tilray has acquired the majority of MedMen’s debts and warrants with an eventual pathway to ownership.
