Photo via News Service of Florida
A California-based company has bought a Florida medical marijuana operation for $53 million in the latest transaction in what investors hope will be among the nation’s most-lucrative medical pot markets.
Under the agreement, the company MedMen will acquire Treadwell Nursery’s five-acre cultivation facility, located in Eustis, and the right to operate 25 dispensaries throughout the state, the maximum currently allowed under Florida law.
Treadwell, which operates as “Remeny Wellness” and is one of the state’s 13 licensed medical-marijuana firms, hasn’t begun selling products but has been authorized by the state to begin cultivation.
MedMen will pay Treadwell half of the $53 million in cash and the remainder in stock traded on the Canadian Securities Exchange, a go-to site for cannabis companies, according to a news release announcing the deal.
“For nearly a decade we have been positioning ourselves to capitalize on enormous market opportunities like this. This acquisition is right in line with our strategy of establishing a presence early on in high potential markets with limited licenses and large populations,” MedMen co-founder and CEO Adam Bierman said in a prepared statement. “Florida is the third most populous state in the country with a medical marijuana market estimated to reach $1 billion in annual sales by 2020. MedMen has built the best-in-class brand, and we continue to invest in premium assets that solidify our dominant position in the most important cannabis markets in the world.”
The deal “reflects the belief nationally and internationally that Florida is a very strong medical cannabis market, even though it is in its infant stages,” Jeff Sharkey, founder of the Medical Marijuana Business Association of Florida, told The News Service of Florida.
“Acquisition by these types of companies will bring a high level of professional expertise into the development of products and the ability to deliver high-quality medicine to patients,” he said.
The Treadwell deal is the latest multimillion-dollar transaction in Florida’s highly regulated medical-marijuana industry. Lawmakers have restricted the number of licensed operators in the state, which has intensified competition for the licenses and boosted their value.
A year ago, a Canadian-backed firm took over management of Chestnut Hill Tree Farm in a $40 million deal involving Ontario marijuana grower and processor Aphria Inc. The Florida medical-marijuana treatment center is now known as “Liberty Health Sciences.”
Investors from around the world have wooed the state’s licensed marijuana operators since Florida lawmakers first legalized non-euphoric cannabis for a limited number of patients in 2014.
The courtship has exploded since Florida voters approved a constitutional amendment in 2016 that broadly legalized medical marijuana. More than 100,000 patients have registered for the treatment, and state health officials have estimated that at least 500,000 Floridians could be eligible for medical marijuana use.
But some industry analysts predict twice as many patients could be eligible because, in part, the Sunshine State is home to so many veterans. Under the constitutional amendment, post-traumatic stress disorder, which afflicts many veterans, is one of the debilitating medical conditions that allows patients to sign up for marijuana treatment.
“The purchase of the Treadwell MMTC (medical marijuana treatment center) license by MedMen Enterprises, particularly at the $53 million price tag, shows the strong interest in Florida’s burgeoning medical marijuana industry. If the number of patients continues to expand at the rate of 10,000 per month, there’s no telling where the market could go from here,” Dan Russell, a partner at Jones Walker LLP who represents clients in and around the medical marijuana industry, told the News Service.
MedMen operates 18 facilities in California, Nevada and New York, markets that account for nearly half of the legal marijuana operations in the country, according to the news release. The company “is the single largest financial supporter of progressive marijuana laws” on the local, state and federal levels, contributing to “pro-legalization groups, industry organizations and political candidates,” the release said.
The MedMen-Treadwell acquisition is an indicator of what might be to come in Florida, according to Larry Schnurmacher, a venture capitalist who invests in companies that provide services to cannabis operators in Florida and elsewhere.
“The fact that deals are being done is amazing. Capital is definitely coming to the industry, which is a huge acknowledgment of this industry’s value or future,” Schnurmacher, managing partner of Boca Raton-based Phyto Partners, said in a telephone interview.
Investors are looking forward to industry growth, rather than focusing on the current return on investment, Schnurmacher said.
“It’s that, ‘I want to have a play in this industry,’ and that’s important. So it’s kind of a third-party endorsement of the future of the industry. It’s really good,” he said.
Marijuana operators who have state-issued licenses “can jump and down and run around and circles and say, ‘I have a medical marijuana license,’ ” but the license “is not worth anything” if they don’t have the capital to expand, Schnurmacher said.
“Somebody has to come in and say, ‘We’re going to put the money in place to start this business,’ and continue to fuel the industry,” he said.
The MedMen deal is expected to close within 90 days, “subject to customary closing conditions, including receipt of state regulatory approvals,” according to the news release. The companies are expected to seek approval from Florida health officials soon.