Sean “Diddy” Combs has agreed to buy nine cannabis retail stores and three production facilities in Illinois, New York and Massachusetts for $185 million as part of required antitrust divestitures for the pending $2 billion Cresco-Columbia Care megamerger.
The deal to sell off a portion of the combined Cresco-Columbia Care portfolio to Combs, announced Friday, includes the Columbia Care dispensaries in Villa Park and Chicago’s Jefferson Park neighborhood, which have been rebranded as Cannabist, as well as a Columbia Care production facility in Aurora.
If approved by regulators, Combs would form the largest Black-owned cannabis company in the U.S.
“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,” Combs said in a news release.
It is the first foray into the rapidly growing cannabis business for Combs, a successful rapper, record producer and entrepreneur also known by the stage name Puff Daddy. Combs would pay $110 million in cash and finance $45 million through seller notes, with the balance due post-closing after meeting “market-based milestones.”
The Combs sale will bring Chicago-based Cresco Labs, one of the largest publicly traded cannabis companies in the U.S., one step closer to becoming a lot bigger with its proposed acquisition of New York-based Columbia Care in an all-stock merger valued at about $2 billion. The Cresco-Columbiadeal, announced in March, would create a cannabis cultivation and retail giant with more than 180 stores across an 18-market footprint, and will likely require additional divestitures to win regulatory approval.
Founded in 2013, Cresco is in 10 states with 21 production facilities and 49 dispensaries, most of which operate under the Sunnyside banner. In Illinois, Cresco has 10 retail dispensaries — the maximum allowed by the state — and three manufacturing facilities in Joliet, Kankakee and Lincoln.
Columbia Care, which started as a medical-only operator 10 years ago, has grown into one of the largest multistate cannabis companies in the U.S. with a footprint in 18 states, including 99 dispensaries and 32 cultivation facilities.
Cresco and Columbia Care are “in the process of divesting other assets” ahead of the proposed merger, and expect additional announcements to be forthcoming, according to the news release. The companies expect merger approval by the end of the first quarter of 2023.
The Combs sale is expected to close concurrently with the larger Cresco-Columbia Care merger.
Cannabis research firm Headset projects legal U.S. weed sales to surpass $30 billion this year and reach $45.8 billion by 2025. In Illinois, sales have been ramping up since the state legalized recreational marijuana in January 2020. The state legalized medical marijuana sales in 2015.
Last year, the state’s 110 dispensaries sold nearly $1.78 billion in cannabis products, including $1.38 billion in recreational weed and more than $397 million in medical marijuana. Illinois is projected to generate $2.55 billion in annual cannabis sales by 2025, according to Headset.
Minority participation in the cannabis industry has lagged. This year, the state issued 185 conditional dispensary licenses to social equity applicants, generally defined as those with past minor cannabis convictions or from areas of high poverty or cannabis arrests.