Week in Review: AG Barr blasted for marijuana merger reviews, more M&A deals altered, L.A. shifts course & more

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William Barr investigates marijuana mergers, Week in Review: AG Barr blasted for marijuana merger reviews, more M&A deals altered, L.A. shifts course & more

U.S. Attorney General William Barr.

U.S. Attorney General William Barr ordered investigations into 10 proposed marijuana industry mergers – a move that a career Justice Department prosecutor charged was “not even close to meeting established criteria” for such reviews. That prosecutor, John Elias, agreed the reviews amounted to industry “harassment.”

MJBizDaily takeaway: The episode stands as a warning to the U.S. cannabis industry that powerful government officials remain willing to let their biases interfere with the business dealings of legal marijuana companies.

While Barr might not have broken any laws, it’s arguable he overstepped – as Elias told a House panel. Cannabis companies were forced to produce millions of documents, and the scrutiny contributed to the scuttling of the $682 million MedMen-PharmaCann merger.

Canopy Growth amends Acreage acquisition 

Canadian marijuana producer Canopy Growth changed the terms of its proposed acquisition of U.S. multistate operator Acreage Holdings, revising the value downward from $3.4 billion to roughly $900 million.

MJBizDaily takeaway: The writing was on the wall for such a move. Acreage’s recent decision to secure a $15 million loan at a whopping 60% interest rate was a major indicator of the cash-strapped company’s financial woes.

Whether Canopy can turn around Acreage’s falling star remains to be seen. The deal’s closure remains conditioned on the U.S. government legalizing marijuana.

L.A. shifts course dramatically

The Los Angeles City Council gave its tacit approval to major regulatory changes that are poised to dramatically upend the city’s legal marijuana market by overhauling  the MJ business licensing plan and how L.A.’s social equity program works.

MJBizDaily takeaway: It will probably take weeks for stakeholders to fully grasp the significance of the shift in L.A.. But a central change that has some exuberant and others up in arms is that retail permits will be granted only to social equity applicants until 2025.

That means that unless a business is majority owned by a person who qualifies for the social equity program, there’s no way into the L.A. marijuana market – at least as a retailer.

Aurora Cannabis shuts facilities, lays off 700

Canadian producer Aurora Cannabis will shutter five of its facilities and lay off 700 employees. The moves are part of a refocusing that includes cutting costs and streamlining production.

MJBizDaily takeaway: Aurora is the latest Canadian cannabis business to announce a dramatic course correction. All relate back to their overspending on cannabis canopy and a spree of mergers and acquisitions around the world.

Over the past year, others have pivoted to shed costly infrastructure and spontaneous investments that did not pan out. Make no mistake: The Canadian industry is growing rapidly. But the large players still have work to do to rightsize their ships.

Denver issues first marijuana R&D license

The city of Denver awarded its first marijuana research and development permit for a private business to help in the study of  cannabis as a medical treatment.

MJBizDaily takeaway: Industry insiders have long speculated that the medical potential of marijuana has barely been touched, since the vast majority of scientific research on the plant has not been for such purposes – but rather to back the failed war on drugs.

With further R&D, it’s possible cannabis could yield more effective medical treatments for an array of ailments. Denver’s move could help pave the way for a new generation of medical marijuana products, or at least for more R&D programs in other cities and states.

Curaleaf revises acquisition deal

Another acquisition deal where terms were changed significantly is the purchase of Chicago-based Grassroots Cannabis by Massachusetts-based Curaleaf. The deal initially was valued at $875 million. But thanks to falling stock prices, the deal is now worth roughly $700 million.

MJBizDaily takeaway: The merger will still be a blockbuster for Curaleaf by expanding its U.S. footprint from 18 states to 23.

But in contrast to the Canopy-Acreage deal, the drop in value of the GrassRoots-Curaleaf transaction was on the buyer’s side. Curaleaf is publicly traded, and the value of its stock has plummeted – as have the values of most publicly traded MJ companies over the past year.

By contrast, Grassroots is privately held.

John Schroyer can be reached at johns@mjbizdaily.com