Editors Note: This was republished with permission from Crain Chicago and written by John Pletz.
The owner of Windy City Cannabis shops wants Beau Wrigley to pay $80 million in damages for a sale that never closed.
William “Beau” Wrigley Jr., who is already facing lawsuits over dreams of a marijuana company’s initial public offering that went up in smoke, is fighting a request for arbitration in a deal to buy a half-dozen Chicago-area pot shops that also vaporized.
Wrigley, who resigned last year as CEO of Atlanta-based marijuana company Parallel, filed suit in federal court in Chicago this week, asking a judge to declare that he shouldn’t be included in arbitration over the failed deal by Parallel to buy six Windy City Cannabis stores for $100 million. (Read the lawsuit below.)
The deal has been in limbo for more than a year. Since then, the market for cannabis stocks has cratered, pushing down the value of marijuana businesses. The state also has held lotteries to issue 185 new dispensary licenses, further undercutting the value of marijuana shops.
Parallel reached a deal in April 2021 to buy Windy City Cannabis shops, which were owned by Steve Weisman and Weisman Holding. It was one of several deals that were supposed to culminate in the IPO of Parallel later that year through a merger with a special-purpose acquisition company, or SPAC, called Ceres Acquisition (OTC: CERAF).
The SPAC deal fell apart and Wrigley later resigned as CEO and chairman of Parallel amid a cash crunch. Investors in Parallel have sued in Florida and New York, saying they were misled about the financial health of the company.
Windy City Cannabis is not the first marijuana deal to blow up, underscoring the Wild West nature of a nascent, fast-moving industry where entrepreneurs have both made and lost fortunes.
PharmaCann, one of the four big multistate marijuana companies based in Chicago, planned to sell to MedMen for $682 million in 2018, but the deal fell apart. Verano Holdings’ deal in 2019 to sell to Phoenix-based Harvest Health & Recreation for $850 million also came undone.
Verano later went public, but PharmaCann has struggled to keep up with Chicago-based peers, such as Green Thumb Industries and Cresco Labs, which are among the largest players in the industry.
Several smaller players have been sold for tens of millions of dollars in the past year.
Windy City was an even bigger prize. After two waves of consolidation, Windy City is one of the few remaining companies in Illinois with multiple licenses that could give an acquirer the ability to enter the Illinois market with enough scale to compete with Cresco, GTI, Verano and others who hold the maximum 10 retail licenses allowed by law.
But Windy City’s deal, which was supposed to close by April, remains up in the air. Parallel hasn’t come up with the money to complete the deal, nor has it been able to get approval from state regulators to transfer the retail licenses.
One of the challenges, according to a related lawsuit filed in Cook County Circuit Court by Weisman, is the ownership by Wrigley, who was CEO of Chicago-based Wm. Wrigley Jr. until its 2008 sale to Mars for $23 billion, then moved to Florida and got into the pot business in 2017. Although he’s no longer CEO, he’s the largest shareholder in Parallel, according to the litigation. However, the ownership stake involves at least one trust, something that’s prohibited by state regulations.
Wrigley, who was the subject of a Forbes profile just two months before announcing the Windy City deal, was the face of the company until November, when he resigned as CEO.
Now he’s trying to distance himself. In the federal court filing, Wrigley says he was not a party or signatory to the purchase agreement for the Windy City stores and did not act as an agent to Parallel or a related company. According to his filing, Windy City attempted to include him in the arbitration in which it’s seeking $80 million, alleging Parallel and its parent company SH Holdings are the “alter ego of Wrigley such that he should be personally liable for any damages.”
This story has been updated to correct the court where Beau Wrigley filed suit to federal court, not Cook County Circuit Court.