Aphria rebrands Nuuvera
On Tuesday, four days after finalizing its takeover of Nuuvera Inc., cannabis company Aphria Inc. announced its intention to rebrand the smaller company as Aphria International Inc. and subsume its Canadian operations into the main company.
The newly named subsidiary will focus on overseas markets such as Italy, Australia and Germany.
All are countries where Nuuvera has been acquiring properties and developing partnerships over the past year.
Aphria, meanwhile, will take over Nuuvera’s Canadian operations, including supply contracts in New Brunswick and Nova Scotia, according to Aphria CEO Vic Neufeld.
“They were ahead of the curve in terms of scoping out strategic countries,” said Neufeld. “What they’ve lined up in terms of nonbinding letters of intent, we are now taking over and trying to move them across the line to make them binding LOIs.”
Prior to the acquisition, Nuuvera had, among other strategic moves, acquired an Italian import licence and a GMP- certified facility in Malta. It’s also one of a handful of firms competing for a German cultivation licence.
“Malta is very key ... It’s only 400,000 people, but it’s part of the EU, and as long as you get your product processed and credentialed through an EU GMP facility, it can cross every country border,” said Neufeld.
“Whether product input material is grown in Canada, Spain, Por t ugal or Lesotho, all of this can be moved through Malta.”
As f or Germany: “It ’s probably the most lucrative medical cannabis country in the world, given the socialized medicine coverage for cannabis. It is huge. That country alone pays for the entire acquisition.”
The move to rebrand Nuuvera ends months of speculation about Aphria’s international plans, which began after the company agreed to pay a striking $ 825 million ( mostly in shares) for Nuuvera, a largely unknown company with little experience in the cannabis industry but a well- connected management team.
By the time the Nuuvera deal closed last week, a drop in cannabis share prices and a lower cash offer from Aphria — which came, according to Neufeld, after Aphria l earned Nuuvera had 40- per- cent less cash in the bank than indicated — the deal came in at a reported $525 million.
According to Neufeld, Aphria’s decision to acquire Nuuvera wasn’t made until mid-January.
The firms had been worki ng t ogether since early summer 2017, when Nuuvera approached Aphria about a supply agreement to pursue international opportunities, including a bid for a German licence.
“These guys knew how to get to market, what they were missing was a supply chain,” said Neufeld, who agreed in August to supply Nuuvera with up to 17,000 kgs of cannabis annually, and to help build and run a Nuuvera facility in Aphria’s home- base of Leamington, Ont.
At the time, Aphria invested $ 2 million in private round of financing for Nuuvera. Neufeld personally invested $ 200,000 in the company, at $ 1 a share, as did a number of his board members.
The fact that these investments were not publicly disclosed as part of Aphria’s later acquisition of Nuuvera, has raised concerns over the past week about potential conflicts of interest. Neufeld, for his part, denies wrongdoing.
“Did seven or eight insiders including independent board members ... all participate early ( in a private round of Nuuvera finan- cing)? Yes. But a lot of CEOs, a lot of boards do this,” he said.
The decision to move on Nuuvera was made after Aphria acquired a 51- percent stake in greenhouse facility Double Diamond Farms, which added roughly 120,000 kgs of annual production. Nuuvera agreed to buy 60,000 kgs of that production annually.
It was only after Aphria had effectively signed away 77,000 kgs of its product that the firm realized the extent of the margin they were giving up, and the depth of Nuuvera’s connections, domestically and internationally.
That’s when Neufeld decided to approach Nuuvera. “At the time they were trading at $ 6 or $ 6.50 a share. This company (was) going to be double in one year,” he said.