Mergers & Acquisitions Yield Huge Paydays For Cannabis CEOs

Mergers & Acquisitions Yield Huge Paydays For Cannabis CEOs

Include CEOs of marijuana-related businesses with the number of CEOs receiving huge payouts from mergers and acquisitions —huge payouts that often exceed the premiums paid for their company’s stock. Investors might not know what the CEOs of the acquired companies receive in payouts unless the figures show up in proxy statements in advance of annual shareholder meetings.

The details of these agreements can be fuzzy and difficult to decipher. Too often CEOs won’t be required to disclose any final payouts unless they stay on as an executive of the newly-formed company.

Florida-based Trulieve is acquiring Arizona-based Harvest Health & Recreation in a deal initially valued at $2.1 billion. CEO Steve White has “change of control” provisions that could generate a payout well in excess of $10 million. 

White’s change of control provisions or merger payout includes five times his base salary and two years of bonuses. It’s unclear from the regulatory filings what that base salary will be for the payout, or how the bonuses are calculated.

“Usually the big payoff from these (merger and acquisition) deals is the acquisition premium,” said Fred Whittlesey, a marijuana compensation expert who is founder of Seattle-based Compensation Venture Group.

White controls 52% of Harvest’s vote through super-voting shares, according to a proxy statement filed with the U.S. Securities and Exchange Commission in advance of the Aug. 11 shareholder vote on the Trulieve merger.

In other words, White alone has the power to approve the Trulieve deal. He doesn’t need a single additional shareholder to do so.

“You can risk losing control of the company, or you get frontloaded (change-of-control) benefits and swap Harvest shares for Trulieve shares at a premium that are far more liquid to sell.”

And, Mike Regan, founder of Denver-based added, White winds up “owning a piece of a larger entity where the combination is more valuable together than apart.”

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