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Emerald Health Therapeutics Inc
Symbol EMH
Shares Issued 200,143,844
Close 2020-09-04 C$ 0.20
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Emerald Health to sell Pure Sunfarms interest

2020-09-08 14:05 ET - News Release

Mr. Riaz Bandali reports


Emerald Health Therapeutics Inc. has entered into a share purchase agreement with Village Farms International Inc. in respect of the sale of the company's interest in Pure Sunfarms Corp., a joint venture that was established between the company and Village Farms in 2017 in which the company holds a 41.3-per-cent interest.

Pursuant to the share purchase agreement, which was negotiated at arm's length, Village Farms has agreed to purchase 36,958,500 common shares in the authorized share structure of Pure Sunfarms, representing all of the remaining shares of Pure Sunfarms not held by Village Farms, for an aggregate purchase price of $79.9-million. A minimum of $60-million of the purchase price will be paid in cash at closing. In addition, $952,237 of the company's obligations under a promissory note that the company had issued to Pure Sunfarms on March 6, 2020, may be settled or the purchase price will be increased accordingly. The remainder of the purchase price will be settled pursuant to the issuance by Village Farms at closing of a secured promissory note to the company. The note will mature six months after closing and will be secured against a certain number of common shares of Pure Sunfarms held by Village Farms and will bear interest at a rate of 12 per cent per annum. As a result of the transaction, Pure Sunfarms will become a wholly owned subsidiary of Village Farms and the company will cease to have any interest in Pure Sunfarms.

"Emerald made a strategic decision three years ago to partner with Village Farms to create one of the most competitive large-scale cannabis growing operations in Canada, and we are very proud of our foundational role in designing and building this business to its current leading stature in the industry," said Riaz Bandali, chief executive officer of Emerald Health Therapeutics.

"Over the last 12 months, we have worked in a very disciplined and systematic manner to drive Emerald's own premium organic-certified production operation and its medical and R&D [research and development] facilities toward operating break-even and profitability. We also applied our core capability in science-driven innovation to develop and launch our first Cannabis 2.0 product line, our unique nanoemulsion-based cannabis spray. With the anticipated divestment of our Pure Sunfarms and Verdelite assets, we expect that, with the approximately $102-million in non-dilutive cash garnered from these two sales, we will move to a zero-debt position and significant cash reserve while still retaining two attractive operating facilities. We expect that these factors would leave Emerald well positioned to advance our existing and emerging product portfolio and/or to acquire in a strategic and targeted manner new value-added science-based products and services with a positive business outlook focused on achieving revenue growth, profitability and value creation for our shareholders."

The share purchase agreement was unanimously approved by the board of directors of the company and the board of directors recommends that the company's shareholders vote in favour of the transaction. Certain shareholders of the company, including all executive officers and directors of the company, holding an aggregate of approximately 15.6 per cent of the issued and outstanding shares of the company have entered into voting support agreements and have agreed to vote their common shares of the company in favour of the transaction.

Haywood Securities Inc. has given an oral opinion to the board of directors of the company, stating that, as of the date of the opinion and based upon and subject to the assumptions, limitations and qualifications set forth therein, the consideration to be received by the company pursuant to the share purchase agreement is fair from a financial point of view.

The share purchase agreement contains representations and warranties, covenants, and indemnities for the benefit of each of the parties as are customary for transactions of this nature. Completion of the transaction is subject to customary conditions, including obtaining applicable third party and lender consents and regulatory approvals and approval of the shareholders of the company. The share purchase agreement contains customary provisions relating to non-solicitation of alternative transactions. In addition, the company has agreed to pay a termination fee of $3-million upon the occurrence of certain events. A copy of the share purchase agreement will be posted on the company's profile on SEDAR.

Full details of the proposed transaction will be included in the company's information circular, which is expected to be mailed to shareholders in late September, 2020. It is anticipated that the company will hold a meeting of its shareholders in late October, 2020, with closing to occur shortly thereafter.

About Emerald Health Therapeutics Inc.

Emerald Health Therapeutics is committed to cutting-edge cannabis science to create new consumer experiences with distinct recreational, medical and wellness-oriented cannabis and non-cannabis products. With an emphasis on innovation and production excellence, Emerald's three distinct operating assets are designed to uniquely serve the Canadian marketplace and international opportunities. These assets, all in full production, include its organic-certified greenhouse operation in Richmond, B.C. (78,000 square feet); Verdelite, its premium craft cannabis production indoor facility in St. Eustache, Que. (88,000 square foot); and Pure Sunfarms, its 41.3-per-cent-owned joint venture in Delta, B.C., producing high-quality, affordably priced products (1.1 million square feet).

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