The cannabis industry is going strong, and legalization throughout the country is changing the way we purchase cannabis products. There is a growing demand for cannabis both medicinally and recreationally and physical dispensaries are popping up more and more to provide in-person access to a wide range of cannabis products.
Cannabis is undoubtedly becoming a big business, and this is no more evident than in the acquisitions of giant industry players by corporations looking to make their mark on this rapidly growing industry. The most recent acquisition of note is that of MedMen’s New York operation by Ascend Wellness Holdings.
MedMen and the Growing Demand for Local Dispensaries
MedMen is a Multi-State Operator (MSO), a company with dispensaries in multiple states in the U.S.. MedMen primarily operates in California, where cannabis has been legal both recreationally and medicinally for several years. As we know, cannabis legalization is spreading across the country, with New York being one of the latest states to legalize recreational use, having already had a comprehensive medical marijuana program for quite a while. After California, New York is expected to be the largest market for cannabis in the U.S..
MedMen currently has four dispensaries in New York, but has been facing difficulties due to more involved restrictions under state law pertaining to how cannabis can and cannot be sold and marketed. These restrictions are currently being reevaluated as the legalization of recreational cannabis is new to the state. When cannabis was only legal for medicinal purposes in New York, there were still massive restrictions compared to other states, including a restriction on actual flower. Furthermore, MedMen was one of the earliest MSO to enter the space and expanded aggressively across the U.S. before facing financial problems, lawsuits, and a power struggle that ultimately lead to a permanent change in leadership. Now the company is in the middle of a turnaround.
With recreational marijuana use just on the horizon in New York, larger corporations are seeing enormous opportunity as the local market is expected to soar in the coming months.
Ascend Wellness Holdings
Enter Ascend Wellness Holdings, a Massachusetts-based company with operations currently in five states. AWH has acquired MedMen’s New York operation for $63 million, taking on 86.7% of the company’s interest. The agreement involves investing $35 million upfront into MedMen’s New York subsidiary, and a $28 million loan to relieve the company of its piling debts. AWH also has the option to purchase the remaining equity for $10 million. Both companies are optimistic that New York’s new legalization plan will allow this money to be returned quickly, with MedMen maintaining a solid reputation on the local cannabis scene despite their financial struggles in the background.
The deal cannot be completed, however, until it is approved by the New York State Department of Health, which oversees all medical cannabis dispensaries throughout the state. Once approved, MedMen’s four locations in New York could see a whole new era of profitability, offering cannabis products to adults without requiring a medical license to conduct business transactions with consumers. There is no doubt that this new change in legalization will be profitable, as MedMen already has an advantage thanks to its reputation for offering top-shelf cannabis while operating in prime locations such as Fifth Avenue.
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