The owner of pioneering High Times magazine is scrambling to close a marijuana retail acquisition in California that includes a tangle of owners and entities, several social equity partners and properties not yet built out.
Los Angeles-based High Times Holding is trying to complete the $67.5 million deal with Harvest Health & Recreation by putting in just $1.5 million in cash.
If the High Times deal goes through, the majority of the entities will have changed hands from Have a Heart founder Ryan Kunkel to Harvest to High Times in a matter of months.Most of the remainder would be stock in High Times, which has been attempting for two years to raise money through a small-investor Regulation A stock offering.
Arizona-based Harvest Health announced a deal in March to acquire Have a Heart in March for $85.8 million. The transaction closed, but the two companies now are in litigation.
Social equity angle
The corporate wheeling and dealing as well as the nearly all-stock structure of the High Times-Harvest deal has raised concerns about how social equity partners are being treated at a time of protests across the country about racial inequities.
Four of the operating and planned dispensaries in San Francisco and Oakland have social equity partners.
The two transactions in San Francisco appear to possibly trigger the city’s strict social equity ordinance banning a majority change of control without losing the permit and the benefits that come with it.
Oakland’s rules explicitly say that social equity partners are in control of their operations.
California cannabis attorney Omar Figueroa said the deals, without having prior approval of social equity partners, “kind of makes a mockery” of the process. “It’s exploiting the social equity person,” he said.
He also called the acquisitions “funny-money deals because they don’t involve actual cash transfers, just stock swaps.”
Officials with Harvest and High Times didn’t directly respond to the allegation that social equity partners are being exploited, saying they are limited to what they can discuss.
“All we can say is we’re engaged in conversation with all of the prospective partners and focused on finding a mutually beneficial path forward,” High Times spokesman Jon Cappetta wrote in an email to Marijuana Business Daily.
Christine Hersey, Harvest’s director of investor relations, wrote in an email: “Partnerships are one way in which local entrepreneurs can work together with larger, more established players in the sector, enabling both parties to mutually benefit from a collaboration.”
High Times aims to become retail player
The Harvest deal is part of High Times’ strategy to diversify into retail by leveraging public recognition of its brand.
High Times announced plans this spring to aggressively move into California’s marijuana retail market by buying 13 planned and operating dispensaries from Harvest Health and, separately, the Humboldt Heritage cultivation and processing business.
The Humboldt Heritage deal collapsed and the High Times-Harvest retail transaction recently was cut to 10 properties. Of the 10 properties remaining in the planned acquisition, only three are in operation.
High Times itself has cautioned that the amended transaction is contingent on getting approvals from certain owners, as well as state and local regulatory approvals.
Published: June 22, 2020
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