Cannara Biotech Enters Into Agreement to Acquire TGOD's State-of-the-art Cultivation and Manufacturing Facility in Valleyfield, Quebec
Cannara Biotech Inc. has announced an agreement to acquire a fully automated one million sq. ft. cultivation and manufacturing facility from TGOD in Valleyfield, Quebec for $27 million, plus assuming liabilities of $5.7 million. This acquisition is expected to enhance Cannara's annual cultivation capacity to 125,000 kg of premium-grade cannabis. Funding will primarily come through a private equity placement at $0.18 per share. The deal is anticipated to close by June 20, 2021, further solidifying Cannara's position in the Canadian cannabis market.
- Increased annual cultivation capacity to 125,000 kg, enhancing product offering.
- Proximity to existing facility will improve operational efficiencies and reduce costs.
- Transaction supports growth in Quebec's cannabis market, promoting job creation.
- Acquisition funded through a premium-priced private equity placement.
- Related party transaction raises potential conflict of interest due to Olymbec's involvement.
- Pro forma dilution risk with potential issuance of 138,888,889 new shares.
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Newly built fully automated one million sq. ft. facility increases Company's capacity of premium-grade cannabis up to 125,000 kg annually
MONTREAL, June 10, 2021 /PRNewswire/ - Cannara Biotech Inc. ("Cannara" or the "Company") (TSXV: LOVE) (OTCQB: LOVFF) (FRA: 8CB), a vertically integrated producer of premium-grade cannabis and derivative products with one of the largest indoor cannabis cultivation facilities in Canada and the largest in Quebec, today announced that it has entered into a definitive agreement (the "Transaction") to acquire a one million square foot licensed cultivation and manufacturing facility in Valleyfield, Quebec ("Valleyfield Facility") from Medican Organic Inc., a wholly-owned subsidiary of The Green Organic Dutchman Holdings Ltd. (the "TGOD") through an all-cash offer of
"With this acquisition, Cannara continues to increase its footprint and create more jobs in its home province of Quebec," said Zohar Krivorot, President & Chief Executive Officer of Cannara Biotech. "Today's announcement reinforces our position as one of Canada's top leading producer of premium-grade cannabis and cannabis derivative products."
Located in Valleyfield, Quebec, the newly built state-of-the-art facility spans over 1,033,506 sq. ft. providing Cannara the ability to reach an annual cultivation capacity of 125,000 kg of premium-grade cannabis.
"While already marked by a strong balance sheet, we believe that this transaction significantly bolsters our business fundamentals, including annual output, profitability and overall financial position," said Nicholas Sosiak, Chief Financial Officer of Cannara Biotech. "Underlying this acquisition is our confidence in the broader market for competitively priced premium-grade cannabis products and our intention to capture a significant share of it."
Transaction Highlights
- Positions Cannara as one of Canada's top leading cannabis companies: The fully licensed and automated Valleyfield Facility outfitted with climate control and growing systems is comprised of 24 independent growing zones, 200,000 sq. ft rooftop greenhouse and a 200,000 sq.ft cannabis 2.0 processing center. This acquisition positions the Company amongst Canada's top leading cannabis companies.
- Operational and cost synergies from proximity of current Cannara facility ("Farnham Facility"): The Valleyfield Facility and the Farnham Facility are within one hour drive from each other. The proximity of the Company's two mega facilities will increase operational efficiencies, reduce costs and offer additional capacity utilization. As both assets are in Quebec, Cannara will continue to benefit from the province's low cost of electricity. The Company has been granted the "economic development rate" by Hydro-Québec and will therefore receive a reduction in electricity rates until March 31, 2027, which is expected to reduce operating costs at the facilities.
- Continued growth in market share in Quebec: With two leading facilities in Quebec, the Transaction allows Cannara to continue capturing market share in Quebec, Canada's second-largest cannabis market.
- Transaction funded through private equity placement priced at a premium to current market price: The Transaction is majorly funded through a private equity placement at
$0.18 cents providing a free and clear title on the Valleyfield Facility.
Subject to customary closing conditions, the transaction is expected to close on June 20, 2021. The property shall remain at the risk of the Vendor until the closing date. BMO Capital Markets acted as exclusive financial advisor to TGOD.
The acquisition will be financed by a non-brokered private placement of up to
A total of
The participation in the Offerings by Olymbec, may be considered a "related party transaction" (the "Related Party") as defined under Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions ("MI 61-101"). Cannara has determined that exemptions from the formal valuation and minority shareholder approval requirements under MI 61-101 are available. In particular, Cannara has determined that the exemptions set out in paragraphs (a) and (b) in section 5.5 of MI 61-101 are applicable since the aggregate consideration to be paid by the Related Party does not exceed
If only the Committed Amount is raised, the remainder of the funds to complete the acquisition will come from Cannara's working capital and amendments to its current banking facilities. If the maximum amount of
About Cannara Biotech Inc.
Cannara Biotech Inc. (TSXV: LOVE) (OTCQB: LOVFF) (FRA: 8CB) is a vertically integrated producer of premium-grade cannabis and cannabis-derivative products for the Quebec and Canadian markets. Cannara owns two Quebec-based mega facilities spanning over 1,650,000 sq. ft., providing the Company with 125,000kg of potential annualized cultivation output. Leveraging Quebec's low electricity costs, Cannara's facilities will produce purposefully cultivated premium-grade cannabis products at an affordable price. For more information, please visit cannara.ca.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Cautionary Statement Regarding "Forward-Looking" Information
This information release contains certain forward-looking information. Such information involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by statements herein, and therefore these statements should not be read as guarantees of future performance or results. All forward-looking statements are based on the Company's current beliefs as well as assumptions made by and information currently available to it as well as other factors. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Due to risks and uncertainties, including the risks and uncertainties identified by the Company in its public securities filings, actual events may differ materially from current expectations. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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SOURCE Cannara Biotech Inc.