Canadian cannabis grower Cannara Biotech Inc. announced that it has entered into a definitive agreement to acquire a one million square foot licensed cultivation and manufacturing facility in Valleyfield, Quebec from Medican Organic Inc., a wholly owned subsidiary of The Green Organic Dutchman Holdings Ltd. through an all-cash offer of $27 million plus the funding of certain deposit requirements of approximately $5.7 million. 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.
"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. Cannara already has one of the largest indoor cannabis cultivation facilities in Canada and the largest in Quebec. "Today's announcement reinforces our position as one of Canada's top leading producers 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."
Earlier this year, The Green Organic Dutchman (TGOD) initiated the process of monetizing underutilized assets, especially at its cultivation and processing facility in Valleyfield, Quebec. "In doing so, we hope to increase our financial flexibility in order to reduce our debt and capitalize on future opportunities." "The Canadian cannabis landscape has evolved since legalization and so have our real estate requirements. With our shift to the value-added part of the production chain, large indoor cultivation facilities such as Valleyfield are no longer necessary to continue growing our business," stated Sean Bovingdon, TGOD's Chief Financial Officer and Interim Chief Executive Officer earlier.
The Valleyfield Facility and Farnham Facility are within one hour drive from each other. "The proximity of our two mega facilities will increase operational efficiencies, reduce costs and offer additional capacity utilization. As both assets are in Quebec, we will continue to benefit from the province's low cost of electricity. We have 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", the Cannara team adds.
The transaction is majorly funded through a private equity placement at $0.18 cents providing a free and clear title on the Valleyfield Facility. Read more about that here.
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 an exclusive financial advisor to TGOD.