Aleafia Health Inc.
It follows news that the firm has completed a deal to purchase Emblem in an all-stock deal worth C$175 million. Aleafia had previously focused solely on cultivation, while Emblem outsourced cultivation, so the resulting entity resembles a typical vertically integrated cannabis firm.
The acquisition also formed the largest Canadian medicinal marijuana clinic and education centre network, with 60,000 patients seen to date. Emblem shareholders gained a premium from the deal, but Aleafia was working on a thesis of consolidate or get left behind and it was keen to push the agreement over the line.
The enlarged group began trading on the TSX today and it said it now has “a robust cash position” that includes an improved capital markets profile and liquidity. Emblem shares have delisted from the TSXV.
Emblem shareholders now hold a 41% stake in the combined entity, while Aleafia’s shareholders own the remaining 59%.
Aleafia had more than 20 clinics across the country, but it had not been able to secure a licence from Health Canada to sell recreational cannabis. It started to cast admiring glances at Emblem, which had a recognizable brand in Symbl.
The Symbl range includes dried flower and oils, and it is sold in Ontario, Alberta, British Columbia, and Saskatchewan. Emblem was also one of just a handful of producers to gain a listing with Shoppers Drug Mart.
At the time the deal was made, only six producers had a supply agreement with the pharmacy retailer. Harvest One Cannabis Inc.
It will sell Harvest One’s Satipharm brand online, as Canadian pharmacies cannot offer customers medicinal marijuana in-store. It marks the first time that Satipharm branded cannabis will be available for purchase, and the news has led to Harvest One’s share price increasing from $0.79 when trading closed on Friday to $1.11 today (Tuesday, March 19).
Aleafia has two operational facilities, one in Port Perry, Ontario, and the other in the Niagara region. An additional facility in Scugog, Ontario is undergoing a 150,000 sq. ft. expansion.
Once this is completed, it expects these three facilities to yield 98,000kg of dried cannabis flower per year. By the end of 2019, it projects it will have a capacity of 138,000 now that the Emblem deal has been completed.
It has a supply deal in place with Aphria for 175,000kg over the next five years, and it is confident it can meet that demand.
A lot more consolidation is anticipated in the cannabis sector this year, and many firms will be watching on with interest to see how Aleafia’s acquisition pans out.
You could argue that these two businesses make strange bedfellows due to their different approaches. Yet Aleafia chief executive Geoffrey Benic insists this will benefit both companies, creating an entity that can become a major player in the cannabis sector.
“Emblem’s product leadership in the medical and adult-use sectors and highly coveted supply agreements will perfectly complement our cannabis production and clinic operations,” he said. “The acquisition of Emblem rapidly accelerates the execution of Aleafia Health’s strategy and positioning as a vertically integrated, diversified cannabis company with an integrated, highly differentiated consumer ecosystem.”
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