CALIFORNIA: MedMen Enterprises and Chicago-based PharmaCann announce that they have entered into a definitive business combination agreement pursuant to which MedMen and PharmaCann will combine their respective businesses.
Under the Business Combination Agreement, a newly formed holding company (“New MedMen”) will acquire (a) all of the securities of PharmaCann in exchange for subordinate voting shares of New MedMen (the “New Class B Shares”) that are identical to the current Class B subordinate voting shares of MedMen, and (b) all of the Class B subordinate voting shares of MedMen in exchange for New Class B Shares on a one for one basis, pursuant to a plan of arrangement under the laws of British Columbia (the “Arrangement”). The securities to be issued in the Arrangement are intended to be eligible for exemption from the registration requirements under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), in accordance with Section 3(a)(10) thereof. In addition, all of the Class A super voting shares of MedMen will be acquired by New MedMen in exchange for super voting shares of New MedMen (“New Class A Shares”) on a one for one basis, pursuant to the Arrangement.
Under the terms of the Business Combination Agreement, PharmaCann securityholders will be issued New Class B Shares of New MedMen such that following the issuance, the former PharmaCann securityholders will hold approximately 25 percent of the fully-diluted equity of New MedMen (calculated using the treasury stock method), with the majority of such shares to be subject to lock up agreements for a period of 6 months or 12 months from the completion of the Transaction.
Following the completion of the Transaction, current holders of Class B subordinate voting shares of MedMen will hold that number of New Class B Shares equal to the number of Class B subordinate voting shares of MedMen held immediately prior thereto. The terms of the New Class B Shares will be substantively and economically identical to the current MedMen Class B Shares. The Transaction is structured to include an exchange of the current MedMen shares and a new holding company in order to facilitate the tax efficient acquisition of PharmaCann under United States tax laws. Other than the change in the legal entity that is the parent company, which will continue to be incorporated in British Columbia, there will be no change to the substantive or economic rights of the holders of the current Class B subordinate voting shares of MedMen or the current Class A super voting shares of MedMen, as compared to the result if PharmaCann had been directly acquired by MedMen. MedMen shareholders that hold share certificates will need to deliver such certificates for exchange following the closing. All other MedMen shareholders will receive their New MedMen shares without any action on their part.