Another large-scale merger is taking place in the Canadian cannabis sector as Aleafia Health Inc (TSX: ALEF) has announced that they were acquiring Emblem Corp (TSX: EMB) through purchasing all outstanding shares on the market – a transaction estimated at over $173 million USD.
This merger would create Canada’s largest network of cannabis clinics, with over 40 education centers and clinics represented between the two firms. At the same time, the agreement would also provide Aleafia with an entry point into the recreational cannabis market that Emblem is already operating in.
“The Emblem acquisition rapidly accelerates the execution of Aleafia’s strategy to become a vertically integrated, diversified cannabis company. It is difficult to overstate the significance of securing the highest quality medicine for our patients and Aleafia,” said CEO Geoffrey Benie. “Emblem’s product leadership in the medical and adult-use sectors and highly coveted supply agreements will perfectly complement Aleafia’s cannabis production and clinic operations. This is a transformative transaction that positions Aleafia as a global cannabis leader.”
The agreement specifies that Emblem shareholders will receive 0.8377 Aleafia shares for each Emblem common share they owned, worth an equivalent of $1.21 each and a 27 percent premium based on when share prices closed yesterday. As a result of the transaction, the new entity would own the largest national clinic network with a medical cannabis capacity of around 138,000 kg. In total, the deal would represent 40 national medical clinics that have served almost 60,000 patients.
“Emblem’s patient-focused product portfolio and strength in patient education, conversion and retention through GrowWise will be further bolstered by the patient acquisition capabilities of Aleafia’s Canabo clinics. The combination of the companies will form a fully integrated market leader in the medical cannabis sector, with industry-leading patient counts, and the ability to immediately capitalize on full revenue potential,” added Nick Dean, Emblem CEO. “Furthermore, our renowned national brands, robust footprint in emerging value-added products, and strong domestic and international growth opportunities, will cement our position of strength in this highly competitive market.”
While there are many other transaction highlights to note, one significant detail for analysts is the strong cash position Aleafia will have even after the purchase. With a grand total of CAD $69.9 million dollars in cash, the strong liquidity position after the merger will be used to expand across the country and solidify their retail presence even further.
Aleafia shares are still down around 57 percent since Canada legalized marijuana back in mid-October, a slump that’s carried through to most of the sector and now seems unlikely to recover before the year is over. Most analysts remain convinced that the industry still remains ripe for consolidation in the coming months going into the new year, and these types of mergers are going to remain a common sight.
Aleafia Health Inc Company Profile
Aleafia is a leading, vertically integrated cannabis company with major cannabis cultivation & processing and medical cannabis clinics business operations. Aleafia owns two cannabis cultivation facilities, one of which is licensed and fully operational and one which will be fully operational in early 2019. Aleafia will reach a fully-funded annual growing capacity of 98,000 kg in 2019. Canabo Medical Clinics are the largest brick and mortar medical cannabis clinic network in Canada with 22 locations and over 50,000 patients. – Aleafia
Emblem Corp Company Profile
Emblem is a fully integrated cannabis company focused on driving shareholder value through product innovation, brand relevance, and access to patient and consumer channels. Through its wholly-owned subsidiary Emblem Cannabis Corporation, Emblem is licensed to cultivate, process, and sell cannabis and cannabis derivatives in Canada under the Cannabis Act.
Emblem’s state-of-the-art indoor cannabis cultivation facility and Product Innovation Centre is located in Paris, Ontario. Emblem is also the parent company of GrowWise Health Limited, one of Canada’s leading cannabis education services. Emblem trades under the ticker symbol EMC on the TSX Venture Exchange. – Emblem Corp