Cannara Biotech Inc.
Enters into
Definitive Agreement to Acquire TGOD's
State-of-the-Art
Cultivation and Manufacturing
Facility in Valleyfield, Quebec
Newly built fully automated one
million sq. ft. facility increases
Company's capacity of
premium-grade cannabis up to 125,000
kg annually
Montreal, Quebec, Canada -- June 10, 2021 -- InvestorsHub
NewsWire -- 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. ("TGOD"),
through an
all-cash offer of $27 million plus the funding of certain deposit
requirements of approximately $5.7
million.
"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. "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. "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 totaling 600,000 sq. ft., a massive 200,000 sq.
ft.
cannabis 2.0
processing center and a 200,000 sq. ft. rooftop
greenhouse. This acquisition
positions the
Company amongst Canada's top leading
cannabis
companies.
- Operational
and cost synergies from proximity
of current
605,000 sq. ft.
facility located in
Farnham, Quebec ("Farnham
Facility"): The Valleyfield Facility
and 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 $35,000,000
of which
$25,000,000 has
been committed (the
"Committed Amount"). Of the Committed
Amount, $19.3 million will be in the
form of common shares (the "Equity
Raise")
and $5.7 million will be in the form of an unsecured convertible
debenture (the "Debenture Raise" and, collectively with the
Equity Raise, the "Offerings"). The issue price per share
for the Equity Raise is $0.18 which would result in an issuance of
107,222,222 new common shares. The sole
subscriber to the Equity Raise is Olymbec Investments Inc.
("Olymbec"),
a company partially owned/controlled by Mr. Derek
Stern, currently a member of the board of directors of Cannara,
making this part of the transaction a related party transaction.
The number of shares to be issued to Olymbec through the Equity
Raise, combined with Mr. Stern's current holdings, would increase
the percentage of Cannara common shares that he owns
or controls, post-private
placement, to 19%.
A total of $5.7
million will be raised by Cannara through the Debenture Raise via a
private placement to Olymbec. The unsecured convertible debenture
(the "Debenture") will bear interest at a
rate of 4% per annum, compounded semi-annually and payable along
with the principal amount on the third anniversary of their
issue. Subject to the approval of
the TSX.V, Interest on the Debentures
may be payable, at the option of Cannara, by the
issuance
of common shares at $0.18. The conversion price of the
Debenture is $0.18 per common share and the number of common shares
that could be issued to Olymbec upon conversion (excluding any interest paid
in kind) would be 31,666,667 common
shares potentially increasing the
total number of shares to be issued under the Offerings to
138,888,889,
which combined with Mr. Stern's current holdings and the common
shares acquired through the Equity Raise, would increase the
percentage of Cannara common shares that he owns and controls,
post-private Offerings to 192,798,361 or 21.89% of Cannara's common shares.
Until such
time that a disinterested
shareholder
approval is obtained with respect to the establishment of the new
Control Person, the conversion right provided in the Debenture
would be suspended. If the amount of the
Offerings exceeds $25,000,000, the Debenture
will not be issued, and the full amount of the
private placement will be issued in the form of common shares at a
price of $0.18 per share.
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 25% of the market
capitalization of Cannara and Cannara is not listed on the Toronto
Stock Exchange, but only on the TSX Venture Exchange. In
addition, regarding the minority shareholder approval exemptions,
the independent directors have determined that the exemptions
set out in
paragraphs (1)(a) and (b) in section 5.7 of MI
61-101 are applicable in that the aggregate consideration to be
paid by the Related Party does not exceed 25% of the market
capitalization of Cannara and Cannara is not listed on the Toronto
Stock Exchange, but only on the TSX Venture
Exchange.
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
$35,000,000 is raised nearly all of it will be used to finance the
acquisition and to pay for certain capital expenditures
and transition
costs.
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
1,600,000 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.
Contact:
Nicholas Sosiak,
CPA, CA
Chief Financial
Officer
nick@cannara.ca
Zohar Krivorot
President &
Chief Executive Officer
zohar@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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