Aphria reducing its stake in the U.S.
Medical marijuana producer selling millions of shares in Liberty Health Sciences
Licensed medical marijuana producer Aphria Inc. has signed a deal to sell part of its stake in Liberty Health Sciences Inc. as it works to reduce its investments in the United States, where cannabis remains illegal under federal law.
The company, based in Leamington, Ont., is selling 26.7 million Liberty shares at a price of $1.25 per share, representing all its shares in the company that are not subject to Canadian Securities Exchange (CSE) escrow requirements. Aphria will maintain a 28.1-per-cent interest in Liberty after the transaction.
Individual members of the Serruya family — which made their fortune by founding frozen yogurt chain Yogen Fruz — are buying 80 per cent of the shares, while Delavaco Capital is buying the remaining 20 per cent.
“While I continue to believe there is tremendous opportunity in the U.S. for medical cannabis, the sale of these shares serve the best interests of our shareholders,” Aphria CEO Vic Neufeld said Monday in a statement.
He added that the company is committed to work with the operator of the Toronto Stock Exchange to adhere to a TMX Group notice late last year that warned that marijuana companies operating in American states where cannabis is legal are not in compliance with its listing requirements. The TMX said U.S. federal law, which classifies marijuana as an illegal Schedule 1 drug, trumps state law and those in violation could face a delisting review.
Many Canadian cannabis companies dealt with the hazy legal landscape by either listing on the smaller and less risk-averse Canadian Securities Exchange or by focusing on markets outside of the U.S.
But in April 2017, Aphria announced the launch of its U.S. expansion through a strategic investment in an entity that was later renamed Liberty Health Sciences. Aphria also licenses its medical brand of cannabis to Liberty for a royalty.
Last month, U.S. Attorney General Jeff Sessions rescinded an Obamaera memo that suggested the federal government would not intervene in states where cannabis is legal, leaving the door open for legalization in several states.
Instead, Sessions said he was leaving it to federal prosecutors in those states to decide how aggressively to enforce federal law.
Sessions’ rescission prompted the umbrella organization for Canada’s provincial and territorial securities regulators to take another look at its disclosure-based approach for issuers with U.S. marijuana-related activities, and whether it “remains appropriate.”
Monday’s agreement also comes just days after Aphria signed a $20-million deal to sell its minority interest in Arizona cannabis company Copperstate Farms to Liberty, a transaction that is expected to close in the second quarter, as part of its efforts to reduce its direct involvement in U.S. medical marijuana.