This week, an entity owned and controlled by Sean “Diddy” Combs known as Combs Enterprises announced the signing of definitive agreements to acquire certain cannabis assets in New York, Illinois and Massachusetts from Cresco Labs CRLBF CL and Columbia Care CCHWF CCHW CCHW, which are expected to close on a business combination transaction soon.
The Combs Enterprises transaction is also expected to close concurrently with the closing of Cresco’s acquisition of Columbia Care. The total consideration for the Combs transaction will amount to up to $185 million.
This is Combs’ first investment in cannabis, and upon closing will create the country’s largest minority-owned and operated, vertically integrated multi-state operator.
Interested in learning more about the deal and the motivations behind it, Benzinga caught up exclusively with Tarik Brooks, president of Combs Enterprises, who shared details on the context of the acquisition, as well as thoughts on minority entrepreneurship and cannabis legalization in the United States.
A Historic Day
“Today’s a historic day,” Brooks commenced, as he explained the structure and objectives of Combs Enterprises, a collection of businesses and investments that are owned by Sean “Diddy” Combs, ranging from spirits, media, music and fashion, to consumer goods and beyond.
“Today’s announcement is historic in that this is one of the rare opportunities where you have an African-American entrepreneur with the platform and reach that Sean Combs has, who will have the ability to enter a new industry during its very early formative stages and be able to advocate for his community by doing so.”
Watch the interview on YouTube: https://www.youtube.com/watch?v=dDhUG40C4yI
In fact, helping advance minorities in cannabis was the main motivation for Combs’ move into the space.
“For us, the purpose is much bigger than the moment. And when we look at the history of cannabis, despite people of all races basically using cannabis at about the same rates, African-Americans have been disproportionately overpoliced, disproportionately over-criminalized. In fact, we’re arrested at four times the rate of other citizens,” Brooks said.
Furthermore, when you look at the development of cannabis as a thriving industry in the U.S., African-American companies make up 2% of all companies in the space, Brooks added. “That’s just not right. That’s just not fair.”
Thus, Combs Enterprises views it as its responsibility to help drive economic empowerment in its communities. “It’s our responsibility to establish a successful, thriving business in the industry that produces top-quality products, one that hires executives and experts from all kinds of diverse backgrounds,” Brooks said. “But then we also take the responsibility to help build and create the ecosystem around our businesses and make sure those ecosystems also have diverse participants so that everyone has a chance to compete.”
This is exactly how Sean Combs feels as well. “My mission has always been to create opportunities for Black entrepreneurs in industries where we’ve traditionally been denied access, and this acquisition provides the immediate scale and impact needed to create a more equitable future in cannabis,” he said.
Combs Enterprises’ approach to social impact is broad, too. The plan is to leverage the firm’s position and platform to have conversations with regulators and lawmakers, to help ensure that they are developing reasonable, manageable frameworks to enable people to do business and participate in the cannabis industry in their respective states and even at the federal level.
“When that time comes, we want to make sure that the kind of laws and rules that are created are ones that account for what the reality is for minority business people and not just what it should be, and to make sure that we don’t have kind of booby traps or places where minority entrepreneurs can stumble and then have the opportunity taken away from them.”
In addition, Combs Enterprises will seek to empower minorities in the cannabis space. And that starts with the company’s openness and willingness to hire formerly incarcerated people, to help them get their lives back together and rejoin society productively, and extend this to providing tools and programming to help social equity applicants get into the industry and get their footing in a safe and responsible way.
The last piece will be mentorship. “When you look at any successful entrepreneur from any background, one of the key drivers of success is the ability to find mentors that care about your success and to be able to get access to the tools, the technical assistance to help you accelerate growth. And so we will build all of that into the core ethos of the company that we are building in cannabis.”
In a recent interview, Combs said he had been considering an investment in the cannabis industry for several years. So, why did he decide to act on it now?
“As we think about new industry, we spend a lot of time doing research, trying to understand the drivers and the trends in industry,” Brooks explained. “I think one of the things that Sean Combs is uniquely gifted at is being able to spot inflection points in an industry. I think cannabis is at a very important inflection point as from a regulatory level that we’re now at a point we almost have 50% of the U.S. states legalizing some form of cannabis.”
And he continued: “You also are at a point where as the industry develops, brands are becoming more and more important. But again, I go back to that initial point that I made: The purpose is much bigger than the moment. So the thing that really drove Mr. Combs to give me the green light to push hard was when he saw that only 2% of the businesses in cannabis are owned by Black people. That was when he said, ‘you know, we have to jump in and we have to jump in now.’ And so there are a lot of macro factors that make now a very attractive time to get into the space. But that’s really the driver when you get to the essence of why we would do this right now.”
Discussing the transaction in more detail, Brooks went into the reasons to feel bullish on the New York, Illinois and Massachusetts markets.
In his view, New York is going to become one of the most important cannabis markets in the world, when it fully develops.
There’s also an emotional factor. Combs is originally from New York, born in Harlem. He built Bad Boy Records, his first business in New York as well, and he operates schools in the state as well.
“We have a long, deep heritage in New York. It’s in our DNA,” Brooks told Benzinga. “Illinois and Massachusetts are also two rapidly developing, maturing, very attractive cannabis markets, where the regulatory framework is a bit more established in New York. So you kind of know what you’re getting…you see a path and where it’s going.”
From a corporate standpoint, because Combs’ platform is so broad, the company has the ability to look at how its businesses and brands show up in many different markets.
“Sean has proven, throughout his career, to be one of the most prolific brand builders ever,” said Brooks. “He has a unique talent at being able to understand where culture is going and create brands that speak directly to the psychographic and demographic that supports and understands what we do. So we will absolutely leverage that expertize. And I think that the piece that I think people underestimate is our ability to layer on top of that the data and insights we get from having such a broad platform.”
As the conversation unfolded, Brooks touched on legalization, business and many other topics. You can watch the full interview on YouTube.
Looking into the future, Combs Enterprises’ president shared a look at what it holds.
“We’re excited that in the next few weeks or so, we are going to launch a platform that we’ve been building with Salesforce CRM called Empower Global, which is really a way to reimagine the way that African-American businesses participate in e-commerce,” he said. “Different from a lot of platforms that have developed directories that enable people to find black businesses, we actually are going to enable people to transact directly on our platform in a seamless, beautiful way.”
Diddy will also continue his foray back into music. He released his first music in over seven years earlier this spring – a song called “Gotta Move On,” which is doing phenomenally well in the charts. Combs Enterprises is also going to continue to build out its newest music platform, Love Records. “We have a really dynamic platform that is doing amazing things. And so you should expect to continue to hear about, you know, exciting developments from Combs Enterprises.”
As the chat concluded, Brooks shared a call to action.
“I would challenge all of the stakeholders in cannabis, and that’s everybody from the operators to the suppliers to the investors, to the regulators, to the lawmakers, to the consumers, to really stop and take a look at the cannabis industry that exists today and just do an assessment of fairness and how things are right. When industries are developing early, there will naturally be some volatility in how they develop. But in this particular case, the development in this industry should really purposefully right the historic wrongs that have happened to certain communities, particularly Black and Brown communities,” Brooks said.”And I think that is going to be, and should be, fundamental to the development of this industry. Every one of the stakeholders in the industry has a role to play, and we are excited to partner with anybody who was to be on that journey with us.”
Photo: Courtesy of Revolt Media, edited by Javier Hasse.