MedMen Doubles Market Reach with Acquisition of PharmaCann

MedMen Doubles Market Reach with Acquisition of PharmaCann

• MedMen to acquire PharmaCann in all-stock transaction valued at US$682 million, the largest acquisition transaction in U.S. cannabis history.
• The acquisition doubles the number of states where MedMen has licenses to 12.
• The combined addressable market in these 12 states accounts for over 50 percent of the total estimated 2030 U.S. addressable market of $75 billion, according to Cowen Group.
• Combined, MedMen and PharmaCann would be licensed for 66 retail stores and 13 cultivation and production facilities, including pending acquisitions by MedMen.
• PharmaCann unitholders will own approximately 25 percent of the pro-forma company, on a fully-diluted basis, at closing.

All dollar values are in U.S. dollars, unless otherwise noted.

MedMen Enterprises Inc. (“MedMen” or the “Company”) (CSE: MMEN) (OTCQB: MMNFF) (FSE: A2JM6N) and Chicago-based PharmaCann LLC (“PharmaCann”) announced today that both companies have signed a binding letter of intent (the “Agreement”) for MedMen to acquire PharmaCann in an all-stock transaction valued at $682 million.

The resulting pro-forma company (including pending acquisitions by MedMen) will have a portfolio of cannabis licenses in 12 states that will permit the combined company to operate 79 cannabis facilities. The combined company will operate in 12 states, which comprise a total estimated addressable market, as of 2030, of approximately $40 billion according to Cowen Group. Through the transaction, MedMen will add licenses in Illinois, New York, Pennsylvania, Maryland, Massachusetts, Ohio, Virginia and Michigan.

“This is a transformative acquisition that will create the largest U.S. cannabis company in the world’s largest cannabis market,” said Adam Bierman, MedMen’s chief executive officer and co-founder. “The transaction adds tremendous scale to our vertically integrated business model by expanding our U.S. retail footprint across important growth markets while strengthening our cultivation and production capabilities. With the revenue synergies that the deal is expected to produce, MedMen is well positioned to continue executing on our growth strategy. This would not have been possible even two years ago and is a testament to how far both the industry and these two companies have evolved. PharmaCann’s leadership has built a world-class organization, and we are excited about the value this transaction is creating for shareholders.”

Founded in 2014, PharmaCann is one of the largest medical cannabis providers in the U.S. It currently operates 10 retail stores and three cultivation and production facilities across multiple states, including New York, Maryland and Massachusetts, and in Illinois, where it is the largest holder of medical cannabis licenses. The company also owns licenses for retail stores in Pennsylvania, Maryland, Massachusetts, Ohio, Virginia and Michigan, and cultivation and production licenses in all of its markets, excluding Maryland. PharmaCann is known for its high-quality cultivation and production and has one of the best track records in the industry for cannabis license applications.

“PharmaCann has built highly-efficient cultivation centers and dispensaries to promote a better quality of life for medical marijuana patients,” said Teddy Scott, Ph. D., PharmaCann chief executive officer. “This acquisition validates the dedication and level of sophistication we have used to provide consistent patient outcomes. I am proudest of the top-notch team we have assembled here and their dedication to our mission of serving medical marijuana patients. Our organization is a natural fit for MedMen, and we are excited to join a leading enterprise with a best-in-class management team.”

MedMen currently operates 14 retail stores in the primary markets of California, Nevada and New York. The Company recently acquired a license to open and operate 30 retail stores in Florida and has signed binding agreements to acquire an operating retail store in Illinois, cultivation and retail operations in Arizona, and an additional non-operating retail license in California. The Company has cultivation and production facilities in Nevada and New York, and is building facilities in Desert Hot Springs, California and outside Orlando, Florida. PharmaCann is licensed for 18 retail stores in eight states and eight cultivation and production facilities in seven states. Combined, the two companies will be licensed for 66 retail stores and 13 cultivation and production facilities (including pending acquisitions by MedMen).

Strategic Rationale

• Creates Largest U.S. Cannabis Company by Market Reach with Best-in-Class National Footprint: The acquisition expands MedMen’s retail reach to a total of 12 states and gives the Company the ability to leverage the national brand equity it has built with its existing high-profile locations, such as Beverly Hills, Las Vegas and Manhattan’s Fifth Avenue.
• Strengthens Cultivation and Production Capabilities: Upon closing of the transaction, MedMen will have over 800,000 square feet of planned cultivation and production capacity in supply-constrained markets. The added capacity allows MedMen to accelerate the launch of its in-house [statemade] brand and to distribute its partner brands nationally. The combined company will be vertically-integrated in all markets in which it operates, with the exception of Maryland.
• Enhanced Infrastructure for Growth Initiatives: The combined platform bolsters MedMen’s infrastructure on the East Coast and Midwest to continue M&A and license application efforts in new attractive cannabis markets across the U.S.
• Revenue Synergies: Optimization of real estate strategy and product mix in stores has the potential to increase store traffic and basket sizes. The transaction capitalizes on MedMen’s retail brand reputation and PharmaCann’s added reach and production capabilities.
• Accretive to MedMen’s Wellness Platform: PharmaCann’s progress in medical-only markets will add further credibility to MedMen’s existing recreational-focused wellness platform.

Transaction Details

Based on the closing price of the Company’s Class B Subordinate Voting Shares as of October 9^th, the total transaction is valued at $682 million and will be satisfied by the issuance of Class B Subordinated Voting Shares of the Company. Under the terms of the Agreement, PharmaCann holders will own approximately 25 percent of the fully-diluted shares of the Company upon closing and will be subject to lock up agreements for a period of 6-12 months. The specific transaction structure is subject to ongoing tax, financial, and regulatory advice.

The transaction is subject to regulatory approvals by various local and state authorities in each of the markets where PharmaCann’s assets and licenses are held, all debt of PharmaCann being repaid and other customary closing conditions.

The letter of intent is fully binding and subject to contractual obligation.

Board Recommendation

The Board of Directors of both MedMen and PharmaCann have unanimously approved the transaction.

Eight Capital provided a fairness opinion to the Board of Directors of MedMen, stating that in its opinion, and based upon and subject to the assumptions, limitations, and qualifications set forth therein, the transaction consideration is fair, from a financial point of view, to MedMen shareholders.

Marquis Partners acted as financial advisor to PharmaCann on the transaction.

ABOUT MEDMEN:

MedMen Enterprises is a leading cannabis company in the U.S. with assets and operations across the country. Based in Los Angeles, MedMen brings expertise and capital to the cannabis industry and is one of the nation’s largest financial supporters of progressive marijuana laws. Visit http://www.medmen.com

ABOUT PHARMACANN:

PharmaCann LLC, one of the nation’s largest medical cannabis providers, cultivates, processes and dispenses safe, independently tested cannabis products to improve people’s lives. PharmaCann’s dispensaries, called Verilife, and production facilities, called Veriplant, are operating in multiple states including Illinois, Maryland, Massachusetts and New York, with other locations in development including Michigan, Ohio, Pennsylvania and Virginia. By elevating cannabinoid-based products, PharmaCann empowers people with more options for feeling and living better. For more information, visit www.pharmacann.com.

Source: MedMen Enterprises

Cautionary Note Regarding Forward-Looking Information and Statements

This press release contains “forward-looking statements” and “forward-looking information” within the meaning of applicable securities laws (collectively, “forward-looking information”) with respect to the Company, including, but not limited to: information concerning the completion and timing of the completion of the contemplated acquisition of PharmaCann LLC, expectations regarding whether the contemplated acquisition will be consummated, including whether conditions to the consummation of the proposed acquisition will be satisfied and whether the proposed acquisition will be completed on the current terms, the timing for completing the proposed acquisition, expectations for the effects of the proposed acquisition, including the potential number and location of facilities and stores or licenses therefor to be acquired, acceleration of the launch of the [statemade] brand, acceleration of M&A and license applications and increases in store traffic and basket sizes, expectations regarding the markets to be entered into by the Company as a result of completing such proposed acquisition, the ability of the Company to successfully achieve its business objectives as a result of completing the contemplated acquisition, estimates of future cultivation, manufacturing and extraction capacity, estimates of future revenue or revenue growth (and the method by which such future revenue is generated), store related forecasts, including as to number of planned stores to be opened in the future, information as to the development and distribution of the Company’s brands and products, and any other statement that may predict, forecast, indicate or imply future plans, intentions, levels of activity, results, financial position, operational or financial performance or achievements. Such forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, financial position, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, financial position, performance or achievements expressed or implied by such forward-looking information. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, will”, “projects”, or “believes” or variations (including negative variations) of such words and phrases, or statements that certain actions, events, results or conditions “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Except for statements of historical fact, information contained herein constitutes forward-looking information.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management at the date the statements are made including among other things assumptions about: the contemplated acquisition being completed on the current terms and current contemplated timeline; development costs remaining consistent with budgets; favorable equity and debt capital markets; the ability to raise sufficient capital to advance the business of the Company; favorable operating conditions; political and regulatory stability; obtaining and maintaining all required licenses and permits; receipt of governmental approvals and permits; sustained labor stability; stability in financial and capital goods markets; favourable production levels and costs from the Company’s operations; the pricing of various cannabis products; the level of demand for cannabis products; and the availability of third party service providers and other inputs for the Company’s operations. While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies and other factors that could cause actual performance, achievements, actions, events, results or conditions to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Furthermore, such forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, financial position, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, financial position, performance or achievements expressed or implied by such forward-looking information. Such factors include, among others: the ability to consummate the proposed acquisition; the ability to obtain requisite regulatory approvals and third party consents and the satisfaction of other conditions to the consummation of the proposed acquisition on the proposed terms and schedule; the potential impact of the announcement or consummation of the proposed acquisition on relationships, including with regulatory bodies, employees, suppliers, customers and competitors; the diversion of management time on the proposed acquisition; risks relating to cannabis being illegal under US federal law and risks of federal enforcement actions related to cannabis; negative changes in the political environment or in the regulation of cannabis and the Company’s business; risks relating to lack of banking providers and characterization of the Company’s revenue as proceeds of crime as a result of anti-money laundering laws and regulation; the costs of compliance with and the risk of liability being imposed under the laws the Company operates under including environmental regulations; negative shifts in public opinion and perception of the cannabis industry and cannabis consumption; risks that service providers may suspend or withdraw services; the limited operating history of the Company; reliance on the expertise and judgement of senior management of the Company; increasing competition in the industry; risks related to financing activities, including leverage; risks related to the management of growth; increased costs related to the Company becoming a publicly traded company; risks inherent in an agricultural business; adverse agricultural conditions impacting cannabis yields; risks relating to rising energy costs; risks of product liability and other safety related liability as a result of usage of the Company's cannabis products; negative future research regarding safety and efficacy of cannabis and cannabis derived products; risk of shortages of or price increases in key inputs, suppliers and skilled labor; a lack of reliable data on the medical and adult-use cannabis industry; loss of intellectual property rights or protections; cybersecurity risks; constraints on marketing products; fraudulent activity by employees, contractors and consultants; tax and insurance related risks; risk of litigation; conflicts of interest; compliance with extensive government regulation; changes in general economic, business and political conditions, including changes in the financial markets; as well as those risk factors discussed in the Company’s Listing Statement filed on SEDAR at www.sedar.com on May 29, 2018 and discussed in the Company’s other public filings available on SEDAR. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such forward-looking information will prove to be accurate as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. Forward-looking information is provided and made as of the date of this presentation and MedMen does not undertake any obligation to revise or update any forward-looking information other than as required by applicable law.

MedMen Enterprises Inc.
MEDIA CONTACT:
Allison Metcalf
(323) 761-6642
Allison.Metcalf@edelman.com
or
INVESTOR RELATIONS CONTACT:
Stéphanie Van Hassel
Head of Investor Relations
(323) 705-3025
investors@medmen.com

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