Goodness Growth vows to take legal action after Verano scraps cannabis acquisition

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Image of contract being torn in half

(This story has been updated to note that Goodness Growth acknowledged the transaction will not proceed.) 

Goodness Growth Holdings vowed to seek “significant damages” after multistate cannabis operator Verano Holdings said on Friday that it was terminating its acquisition of the company and seeking millions of dollars in reimbursements and fees.

Minneapolis-based Goodness Growth accused Chicago-headquartered Verano in a news release of pulling the plug after Goodness refused to accept a lower purchase price.

The acquisition was valued at $413 million when the deal was first announced last February.

In its release, Goodness Growth acknowledged Verano’s repudiation of the deal, adding that “the transaction will not proceed” and the company “intends to immediately commence legal proceedings.”

Verano alleged in its own release that Goodness Growth breached covenants spelled out in the acquisition agreement.

Verano also cited “the occurrence of other termination events” and said it is seeking more than $14 million in termination fees and $3 million in transaction-expense reimbursements.

“We believe the decision to terminate this arrangement agreement was in the best interest of Verano and our shareholders,” George Archos, Verano founder and CEO, said in a statement.

“As we work through the termination process, we expect to provide additional commentary.”

Representatives for Verano and Goodness Growth did not respond to MJBizDaily requests for comment.

It’s the second time in two months that a multistate operator has taken steps to ditch a previously announced acquisition.

In August, Ascend Wellness Holdings called off its acquisition of MedMen Enterprises’ New York operation, citing concerns over the state of the company’s assets.

According to the Goodness Growth release, Verano has four ways to terminate the deal under the arrangement:

  • Alleged breaches of certain representations by Goodness Growth.
  • A failure by Goodness Growth to give reasonable consideration to Verano’s comments on the draft Goodness proxy circular. The document was prepared by Goodness Growth and reviewed and cleared by the U.S. Securities and Exchange Commission.
  • The Goodness Growth board’s refusal to reevaluate the terms of the transaction even though that no material adverse changes had occurred to either company.
  • Goodness Growth’s alleged failure to reaffirm its recommendation to shareholders to vote for the transaction, which Goodness said it was planning to do next week.

Goodness Growth said in its release that the company “believes that Verano is repudiating the Arrangement Agreement to avoid fulfilling its obligations thereunder after Goodness refused Verano’s request to reduce the agreed-upon consideration payable by Verano under the Arrangement Agreement.”

The acquisition would have given Verano one of two vertically integrated medical cannabis licenses in Minnesota, including a cultivation facility and eight dispensaries.

It also included one of 10 vertically integrated licenses in New York.

In addition, the deal would have given Verano assets in Arizona, Maryland and New Mexico.

On Verano’s Aug. 16 earnings call, CEO Archos reassured shareholders that, even though the New York market might have lost its appeal for Ascend Wellness, Verano was still on track to close its deal with Goodness Growth.

“We still think that New York is a very long-term viable market for us,” Archos said. “We’re positioned well there with the cultivation capacity, the stores. So we’re excited about that opportunity.

“But for us,” he continued, “Goodness Growth is not only New York. And you know, we look at New York as a good asset, but something I’ve always said is the jewel in that deal for us is Minnesota. That’s the market we’re really excited about, and New York was kind of the cherry on top.”

Shares of Goodness Growth on Friday tanked by roughly 62% on the Canadian Securities Exchange (GDNS) and the U.S. over-the-counter markets (GDNSF).

Verano shares dipped by about 3% on the OTC (VRNOF) and by less than 1% on the CSE (VRNO).

Kate Robertson can be reached at kate.robertson@mjbizdaily.com.