Diddy buys cannabis businesses for $185 million

Entertainment mogul Sean «Diddy» Combs announced late last week that he was launching what is billed as the largest black-owned cannabis brand by purchasing $185 million for cannabis production sites and stores in three U.S. states.

Formerly Puff Daddy buys the business operations of Cresco Labs and Columbia Care, two multi-state U.S. cannabis companies set to divest assets to complete the previously announced merger of both companies.

The transaction, if approved by federal and state regulators, will add to Sean Combs' portfolio of businesses, which includes projects in entertainment, media, fashion and alcohol.

Diddy, chairman and CEO of Combs Enterprises, said he was buying the assets to address inequality in the cannabis sector, where 81 % of businesses are white-owned, according to a legislative report published in Maryland this week.

«My mission has always been to create opportunities for black entrepreneurs in industries where we have 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 statement.

«Owning the entire process - from cultivation and manufacturing to marketing, retail and wholesale distribution - is a historic victory for culture that will allow us to empower diverse leaders across the ecosystem and be bold advocates for inclusion.»

A $185 million agreement

As part of the deal, a new company controlled by Combs will acquire nine cannabis retail stores and three production facilities in New York, Illinois and Massachusetts.

In return, Combs will pay $110 million in cash and a further $45 million in debt financing, plus future payments based on growth criteria, for a total of up to $185 million.

Combs declared that he would rely on the new company to help increase black participation in the cannabis industry, a goal supported by Cresco CEO Charlie Bachtell.

«For an industry that needs greater diversity of leadership and perspective, the substantial presence of a minority-owned operator in some of the country's most influential markets and led by one of the most prolific and influential entrepreneurs of our time is momentous... and incredibly exciting,» Bachtell said in a statement on Friday.

«We are delighted to welcome Sean and his team to the industry.

In March, Cresco Labs announced that it would acquire Columbia Care in a $2 billion stock deal. The merger of the two companies forms one of the largest cannabis companies in the U.S., with operations in 18 states where cannabis is legal, including pioneering Colorado and California.

However, regulations governing the cannabis industry and business licenses require companies to divest certain assets in states where their operations overlap, such as Arizona, Florida, Illinois, Massachusetts, New York and Ohio.

Largest black-owned cannabis company

The transaction is Combs' first venture into the cannabis industry and will create the first vertically integrated, minority-owned and operated multi-state cannabis operator in the U.S., in a sector expected to reach $72 billion by 2030.

Vertically integrated operations in New York, Illinois and Massachusetts will enable Combs' new company to grow and manufacture cannabis products, while wholesale and distribution assets will market these branded products to licensed dispensaries in major metropolitan areas, including New York, Boston and Chicago. The agreement also includes retail stores in all three states.

«These assets give the Combs team a significant presence in the market, allowing them to have maximum impact on the industry as a whole,» said Nicholas Vita, CEO and co-founder of Columbia Care.

«It's clear to us that Sean has the right team to continue the strong legacy of these Columbia Care and Cresco Labs facilities, and we look forward to seeing how he helps shape the cannabis industry in the future through his entrepreneurial leadership and innovation.»

The transaction is subject to a number of conditions, including regulatory approval, antitrust clearance and the closing of Cresco Labs' acquisition of Columbia Care. The companies are also in the process of disposing of other assets to meet regulatory requirements prior to closing.