The Parent Co. said Monday it agreed to acquire 100% of the equity of California-based Coastal Holding Co. in a cash-and-stock deal worth up to $56.2 million, adding a new wrinkle to a set of lawsuits filed by the co-founders of MedMen Enterprises against five Coastal co-owners.
In a news release, San Jose, California-based The Parent Co. said it will pay for the transaction with up to $16.2 million in cash and another $20 million in its common stock upon signing management-services agreements at each Coastal location and another $20 million in stock “contingent upon the successful transfer of Coastal’ s cannabis licenses.”
The vertically integrated operator also said it will inherit a minority stake that Coastal holds in a Southern California dispensary and an option to purchase the remainder of that business for $9 million in cash.
The transactions are expected to close next year.
But there’s a potential stumbling block: Former MedMen executives Adam Bierman and Andrew Modlin, who are minority owners of Coastal, have sued other co-owners to halt the sale of the company.
Coastal holds eight marijuana business licenses around Southern and Central California for retail, delivery, distribution and manufacturing.
Los Angeles-based attorney Hilary Bricken said last week that litigation like what Coastal is facing might be enough to cause potential buyers to change their minds.
According to court records, one would-be buyer of Coastal has backed out of a similar acquisition deal struck earlier this year.
The Parent Co. said in the release that the Coastal deal would expand its California retail store and delivery depot footprints to 11 and six, respectively, and position the company “with the second largest operating retail dispensary and delivery hub in the State with an expanded reach to over 80% of California’s population.”