MedMen and PharmaCann Move Forward with Merger Plans

MedMen Signs Definitive Agreement for the Acquisition of PharmaCann
  • MedMen will undertake a re-organization whereby a new holding company will acquire each of MedMen and PharmaCann.
  • The acquisition doubles the number of states where MedMen has licenses to 12.
  • The combined addressable market in these 12 states accounts for over 50 percent of the total estimated 2030 U.S. addressable market of $75 billion, according to Cowen Group.
  • Combined, MedMen and PharmaCann would be licensed for 76 retail stores and 16 cultivation and production facilities, including pending acquisitions by MedMen and PharmaCann.
  • PharmaCann unitholders will own approximately 25 percent of the pro-forma company, on a fully-diluted basis (using the treasury stock method), at closing.

All dollar values are in U.S. dollars, unless otherwise noted.

LOS ANGELES,December 24, 2018–(BUSINESS WIRE)–MedMen Enterprises Inc. (“MedMen” or the “Company”) (CSE: MMEN) (OTCQX: MMNFF) (FSE: A2JM6N) and Chicago-based PharmaCann, LLC (“PharmaCann”) are pleased to announce that, further to the binding letter of intent in respect of a business combination transaction announced on October 11, 2018, they have entered into a definitive business combination agreement (the “Business Combination Agreement”) pursuant to which MedMen and PharmaCann will combine their respective businesses (the “Transaction”).

Under the Business Combination Agreement, a newly formed holding company (“New MedMen”) will acquire (a) all of the securities of PharmaCann in exchange for subordinate voting shares of New MedMen (the “New Class B Shares”) that are identical to the current Class B subordinate voting shares of MedMen, and (b) all of the Class B subordinate voting shares of MedMen in exchange for New Class B Shares on a one for one basis, pursuant to a plan of arrangement under the laws of British Columbia (the “Arrangement”). The securities to be issued in the Arrangement are intended to be eligible for exemption from the registration requirements under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), in accordance with Section 3(a)(10) thereof. In addition, all of the Class A super voting shares of MedMen will be acquired by New MedMen in exchange for super voting shares of New MedMen (“New Class A Shares”) on a one for one basis, pursuant to the Arrangement.

Under the terms of the Business Combination Agreement, PharmaCann securityholders will be issued New Class B Shares of New MedMen such that following the issuance, the former PharmaCann securityholders will hold approximately 25 percent of the fully-diluted equity of New MedMen (calculated using the treasury stock method), with the majority of such shares to be subject to lock up agreements for a period of 6 months or 12 months from the completion of the Transaction.

Following the completion of the Transaction, current holders of Class B subordinate voting shares of MedMen will hold that number of New Class B Shares equal to the number of Class B subordinate voting shares of MedMen held immediately prior thereto. The terms of the New Class B Shares will be substantively and economically identical to the current MedMen Class B Shares. The Transaction is structured to include an exchange of the current MedMen shares and a new holding company in order to facilitate the tax efficient acquisition of PharmaCann under United States tax laws. Other than the change in the legal entity that is the parent company, which will continue to be incorporated in British Columbia, there will be no change to the substantive or economic rights of the holders of the current Class B subordinate voting shares of MedMen or the current Class A super voting shares of MedMen, as compared to the result if PharmaCann had been directly acquired by MedMen. MedMen shareholders that hold share certificates will need to deliver such certificates for exchange following the closing. All other MedMen shareholders will receive their New MedMen shares without any action on their part.

Completion of the Transaction is subject to (a) approval of the Arrangement by at least 66 2/3 percent of the votes of holders of MedMen shares cast at a special meeting of MedMen shareholders to be held in 2019 (the “Meeting”); (b) approval of the CSE for the listing of the New Class B Shares; (c) approval of the Arrangement by the Supreme Court of British Columbia; (d) approval of the transfer of the cannabis-related licenses of PharmaCann by local and state authorities in each of the markets where PharmaCann’s assets and licenses are held; (e) certain debt of PharmaCann being repaid; and (f) other customary closing conditions. In the event that certain licenses that are not deemed to be key are not approved for transfer at the closing, such non-key licenses will remain beneficially owned as they are prior to the closing and up to 30 percent of the consideration payable (the “Holdback Shares”) may be withheld by New MedMen pending the approval of such transfers. If such transfers are not approved within 24 months of the date of the Business Combination Agreement, such non-key licenses will be sold and, based on the proceeds, the Holdback Shares will be released to the PharmaCann securityholders or New MedMen.

On closing, the New MedMen board of directors will consist of eleven directors, who are anticipated to be the nine current directors of the Company and 2 additional directors to be nominated by PharmaCann. As part of the Transaction, MedMen has agreed to make available certain funds to PharmaCann in order to permit PharmaCann to make certain expenditures pursuant to an agreed interim spending plan. Such funds will be lent to PharmaCann and will bear interest at market rates and, if the Transaction is terminated, such will be repaid within 12 months of termination.

Full details of the Arrangement will be set out in the Canadian information circular of MedMen, which will be mailed to MedMen shareholders in respect of the Meeting. Copies of the Business Combination Agreement, Canadian information circular and certain related documents will be filed with Canadian securities regulators and will be available on SEDAR at www.sedar.com in due course and on MedMen’s website at www.medmen.com in accordance with the requirements of Rule 12g3-2(b) under the U.S. Securities Exchange Act of 1934, as amended.

The resulting pro-forma company (including pending acquisitions by MedMen) is anticipated to have a portfolio of cannabis licenses across the U.S. that will permit the combined company to operate 76 retail stores and 16 cultivation and production facilities. The combined company will operate in 12 states, which comprise a total estimated addressable market, as of 2030, of approximately $40 billion according to Cowen Group. Through the Transaction, MedMen is anticipated to add licenses in Illinois, New York, Pennsylvania, Maryland, Massachusetts, Ohio, Virginia and Michigan.

Founded in 2014, PharmaCann is one of the largest medical cannabis providers in the U.S. It currently operates 10 retail stores and three production facilities across multiple states, including New York, Maryland and Massachusetts, and in Illinois, where it is the largest holder of medical cannabis licenses. The company also owns licenses for retail stores in Pennsylvania, Maryland, Massachusetts, Ohio, Virginia and Michigan, and cultivation licenses in all of its markets, excluding Maryland and Michigan. PharmaCann is known for its high-quality cultivation and production and has one of the best track records in the industry for cannabis license applications. Most recently, PharmaCann was awarded two additional licenses in Pennsylvania. Each license allows for three retail outlets for a total of six locations.

The following chart shows the combined footprint and operational status of MedMen and PharmaCann assets.

Footnote to chart:

  • List of operational facilities Includes two “Powered by MedMen” stores – stores not yet MedMen rebranded but owned by MedMen Enterprises, LLC (“the Company”). Also, includes four stores managed by MedMen but not owned by the Company.
  • The chart includes licenses to be acquired through the announced PharmaCann transaction and recently closed and recently announced license acquisitions in Arizona, Illinois and San Jose Area. Through the acquisition of PharmaCann, MedMen will own an additional twenty-seven licenses across 12 states; permitting operations of an additional 24 retail facilities and 7 cultivation/manufacturing facilities. Those 12 states comprise approximately 50 percent of the total U.S. population.
  • The PharmaCann retail license listed in the chart for Michigan reflects the acquisition of real property that has local permitting for cannabis retail sales, and is subject to additional licensing requirements.

The securities described herein to be issued in the Transaction will be offered and sold in reliance upon available exemptions from the registration requirements under the U.S. Securities Act and have not been, and will not be, registered under the U.S. Securities Act, or any U.S. state securities laws, and may only be re-offered or re-sold in the United States pursuant to registration under the U.S. Securities Act and all applicable state securities laws or in compliance with the requirements of an applicable exemption therefrom.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

ABOUT MEDMEN:

MedMen Enterprises is a leading cannabis company in the U.S. with assets and operations across the country. Based in Los Angeles, MedMen brings expertise and capital to the cannabis industry and is one of the nation’s largest financial supporters of progressive marijuana laws. Visit http://www.medmen.com.

ABOUT PHARMACANN:

PharmaCann, LLC, one of the nation’s largest medical cannabis providers, cultivates, processes and dispenses safe, independently tested cannabis products to improve people’s lives. PharmaCann’s dispensaries, called Verilife, and production facilities, called Veriplant, are operating in multiple states including Illinois, Maryland, Massachusetts and New York, with other locations in development including Michigan, Ohio, Pennsylvania and Virginia. By elevating cannabinoid-based products, PharmaCann empowers people with more options for feeling and living better. For more information, visit www.pharmacann.com.

Original press release

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Published by NCV Newswire
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