Mr. Riaz Bandali reports
EMERALD HEALTH THERAPEUTICS COMPLETES SALE OF PURE SUNFARMS INTEREST & ACHIEVES PIVOTAL MILESTONE IN TRANSFORMING ITS BUSINESS
Emerald Health Therapeutics Inc. has completed the previously disclosed sale of its 41.3-per-cent interest in Pure Sunfarms Corp. (PSF) to Village Farms International Inc. for consideration of $79.9-million.
As previously announced by the company on Sept. 8, 2020, Emerald Health entered into a share purchase agreement with Village Farms in respect of the sale of the company's interest in PSF, a joint venture that was established between the company and Village Farms in 2017. Pursuant to the share purchase agreement, Village Farms has purchased 36,958,500 common shares in the authorized share structure of PSF, representing all of the remaining shares of PSF not held by Village Farms, for an aggregate purchase price of $79.9-million. Village Farms paid $60-million of the purchase price in cash at closing and issued a secured promissory note to the company in the principal amount of $19.9-million. The note will mature in six months from the date hereof, is secured against a certain number of common shares of PSF held by Village Farms and bears interest at a rate of 12 per cent per year. In addition, the company's obligations under a promissory note in the principal amount of $952,237 that the company had issued to PSF on March 6, 2020, have been settled without any payment.
"This is a transformative day for Emerald. Over the last year, our new leadership team has worked tirelessly to reshape the entirety of our business for future success, with immense progress having been made on improving the financial, strategic and operational facets of our business -- and this work will continue with an unwavering effort. We are 100 per cent committed to prioritizing profitable growth and the generation of solid returns on invested capital," said Riaz Bandali, chief executive officer and president of Emerald. "This transaction marks a pivotal milestone in our strategy as we, purposefully, shift away from large-scale, high-volume, asset-intense, value-segment-focused cultivation. We will continue to direct resources to provide defined-scale, high-quality dried flower to the premium segment of the market, but we intend to focus more investment on the science-based development of differentiated, high-margin cannabis derivative products.
"The closing of this sale of our joint venture interest and the receipt of the $60-million first payment allows us, first and foremost, to immediately start moving our balance sheet towards a zero-debt position with a very healthy working capital and cash balance. As evident in our last financial report, we have modest and diminishing operating cash needs. Consequently, a sizable portion of our capital will be available to invest in new business initiatives.
"We believe that the entire cannabis sector is undergoing a structural change, which, over the next several quarters, will fundamentally change the number of companies that remain competitive in the sector. This structural change has been further compounded by the unfortunate, but immense, challenges caused by the ongoing global COVID-19 pandemic. Together, these events are creating an unprecedented and exceptional opportunity to utilize our new team's considerable M&A [mergers and acquisitions] experience and leverage our enviable balance sheet by considering the selective acquisition and/or licensing of well-positioned, geographically diverse businesses, products and intellectual property that align well with our evolving growth strategy -- and with potentially attractive terms.
"We will also actively consider prudent, defined-scale investments: to enhance the value of our valuable ongoing operations, including our organic-certified, premium-segment-focused hybrid greenhouse facility in Richmond, B.C., and our medical, R&D [research and development] and processing facility in Saanich, B.C.; to accelerate the scale of our science-driven innovation capability and broaden our promising and unique portfolio of products; and to further strengthen our intellectual property portfolio. We will also consider the merit of opportunistically deploying some of our cash reserves to improve our capitalization structure.
"The many steps we have taken to restructure the business, when coupled to this transformational transaction and the other strategic actions we have under way, have built a solid foundation for the future of Emerald. Moreover, we have put ourselves in a very attractive and unique position to pursue multiple growth options in a self-sustained manner. We will now turn our attention to a clear focus on increasing Emerald's growth, profitability and value."
PSF is now a wholly owned subsidiary of Village Farms, and the company does not have any interest in PSF.
About Emerald Health Therapeutics Inc.
Emerald Health Therapeutics is committed to creating new consumer experiences with distinct recreational, medical and wellness-oriented cannabis and non-cannabis products, with an emphasis on life-science-based innovation and product excellence.
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