Columbia Care CEO set to net $100M-plus from Cresco cannabis merger

Image of a stack of $100 bills

(This story has been updated to reflect that Columbia Care stockholders approved the company’s acquisition by Cresco Labs.)

Columbia Care co-founder and longtime CEO Nicholas Vita likely will emerge with more than $100 million in cash and stock, thanks to Cresco Labs’ pending acquisition of the New York-based multistate marijuana operator.

Details of Vita’s pay package were shared in a regulatory filing in advance of Friday’s special meeting at which Columbia Care stockholders approved the blockbuster acquisition by Chicago-based Cresco.

Columbia Care said Friday that the deal is expected to close near the end of this year.

A compensation expert called parts of the CEO’s compensation package “atypical.”

Columbia Care didn’t respond to repeated requests for comment.

Details of pay package

Vita’s stock holdings and potential compensation include the following, according to the regulatory filing:

  • Stock valued at $95.5 million at the time of the all-stock merger announcement on March 23. Cresco’s acquisition price represented a 16% premium at the time. The deal’s initial price tag was around $2 billion, although stock prices have since fallen.
  • A change-in-control benefit valued at $12.2 million as of May 24, to be paid in monthly installments over three years.
  • Accelerated vesting of restricted and performance stock awards. The filing indicates that Vita had 15.6 million restricted stock units and 8.6 million performance stock units.

The merger, pending shareholder and various regulatory approvals, will create one of the largest multistate marijuana operators in the United States.

The combined footprint of the two companies will include more than 130 cannabis retail locations across 17 states and the District of Columbia, reaching about 55% of the U.S. population, the companies said in a news release at the time of the announcement.

Cresco CEO Charlie Bachtell is expected to become chief executive of the merged company.

Highly compensated

Image of Nicholas Vita
Nicholas Vita

Vita, who has been at the helm of Columbia Care for a decade, has long been one of the highest-paid CEOs in the marijuana industry.

In 2021, Vita received total compensation of $4.1 million, according to the company’s annual 10-K report to the U.S. Securities and Exchange Commission.

The compensation included a salary of $485,753, incentives of $360,000 and a stock award valued at $3.3 million.

Vita’s 2020 compensation totaled $3.7 million, including nearly $1 million in salary and incentives, and $2.7 million in stock.

Fred Whittlesey, a marijuana compensation expert and founder of the Compensation Venture Group in Seattle, said the $12.2 million change-in-control benefit likely would be triggered by the fact that Vita won’t be CEO of the merged company.

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Vita signed the change-in-control agreement in April 2019.

“Given that he has been co-founder and CEO since 2012, one should question why this agreement was created in 2019,” Whittlesey told MJBizDaily via email.

Vita will be on the executive committee of the board of directors, according to Columbia Care’s regulatory filing.

“What is atypical is for a founder-CEO who is such a significant shareholder to have any arrangements for change in control … when he’s getting nearly $100 million (in stock in the deal),” Whittlesey added.

Change-in-control agreement

The change-in-control provision calls for Vita to receive:

  • An amount equal to 36 months of his base salary and target bonus at the time.
  • Health insurance coverage for 36 months.
  • Outplacement services for one year to find a new job.

Whittlesey also noted the agreement calls for the vesting of Vita’s stock awards to accelerate at a time when many companies are cutting back on provisions enabling executives to receive the monetary benefit much sooner.

“Companies started getting pushback from proxy advisers and investors on 100% acceleration of all grants,” Whittlesey wrote.

However, Whittlesey noted, “cannabis companies are not yet subject to the same scrutiny” as other industries.

“Because so many investors can’t or won’t invest in cannabis companies, they aren’t paying much attention to them, and executive compensation is still under the radar,” Whittlesey wrote.

Jeff Smith can be reached at jeff.smith@mjbizdaily.com.