California-based medical cannabis producer MedMen Enterprises Inc. has decided against merging with fellow cannabis company PharmaCann LLC.
MedMen had entered a definitive agreement to acquire PharmaCann in an all-stock transaction in December 2018. The deal was valued at $682 million at the time.
The company said its decision was motivated by market developments over the past 12 months. The company noted that the Horizons Marijuana Life Sciences Index, for example, was down 47% since March, and the underperformance meant it now had to allocate capital efficiently.
MedMen now wants to focus on strengthening its position in the state of California and leveraging its retail brand and digital platform to grow the business. This would create "greater shareholder value than the completion of the transaction," the company said.
PharmaCann's operations are spread across multiple states, many of which require further investments before they can be fully utilized. Of these operations, MedMen said the one in Illinois emerged as the "most attractive opportunity for our longer-term, strategic growth plan." The company will acquire it, along with certain assets in Virginia, in exchange for forgiving $21 million in debt owed by PharmaCann.
Meanwhile, MedMen said it appointed Zeeshan Hyder as its CFO. Hyder was the company's chief corporate development officer, overseeing corporate development, investor relations and other financial growth initiatives. He replaces Michael Kramer, whose employment has been terminated.
Hyder is expected to help steer the company towards profitability. MedMen is targeting break-even EBITDA by the end of calendar 2020.
