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Tilray inches closer to the US with MedMen deal

In what they’re touting as their entry point into US cannabis when it’s federally legal, Tilray announced it has acquired a “majority position” in retailer MedMen in a creative deal that CEO Irwin Simon said could lead to a future acquisition.

“There’s no reason that Tilray can’t buy all of MedMen on federal legalization,” he said on a conference call held after the announcement.

Canadians getting creative

Just weeks ago, Irwin told Insider that he was on the hunt for a good deal to ready the Canadian-based company for the US market. Some US cannabis execs took issue with those plans, with GTI’s Ben Kovler going so far as to claim that securities regulations make them impossible.

(Read the full story: GTI’s Ben Kovler thumbs his nose at Canadian ambitions)

But Canadian companies are getting creative. In the case of MedMen, Tilray is buying the majority of the outstanding convertible notes from funds such as Gotham Green Partners. Once it’s legal to do so, Tilray plans to convert the notes to an equity stake. “We want optionality to acquire the whole thing,” said Simon. 

The real deal

Irwin believes they got a good price — US $165.8 million for 75% of the outstanding notes and 65% of the outstanding warrants — for their stake in MedMen, which operates in several states with 25 stores and 21 licenses. But the company has had its share of challenges, largely with debt and losses, a few lawsuits and plenty of management changes.

“Our management team has spent the past 18 months executing a disciplined turnaround plan,” said CEO Tom Lynch in a statement. “We are grateful to our stakeholders for their patience and support as we worked to fix the business and rebuild trust and credibility. We believe that patience has paid off, as these efforts have succeeded in attracting partners who share our vision for building the world’s most powerful cannabis retail brand.”

No comment (yet) from Ben Kovler.

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