Aphria says review reveals conflicts of interest

Cannabis producer LEAMINGTON Aphria Inc. says a review of its governance procedures revealed certain non-independent directors had conflicting interests in its acquisition of several Latin American companies.

The company said Friday that a separate review of the takeover of the companies in Jamaica, Argentina and Colombia found the purchase price for the deal to be within an acceptable range, and assets for all three companies were in place. “The special committee’s findings give me and the board full confidence that it was executed at an acceptable value and is consistent with the company’s international growth strategy,” Irwin Simon, the company ’s independent board chairman, said in a statement. Aphria launched the reviews after short-sellers alleged in December that the acquisitions totalling $280 million were “largely worthless” and the price “vastly inflated” to benefit insiders.

The accusations spawned an investor sell-off of Aphria stock and a management shakeup which involved the departure of CEO Vic Neufeld and co-founder Cole Cacciavillani.

The independent review issued Friday also announced the departure of another company founder, John Cervini. Cervini will stay on in a “non-executive operational capacity ” at the company, according to Friday’s news release.

“We applaud the independent committee for taking this matter seriously and for making significant changes to the company’s board and governance policies,” said a joint statement by Gabriel Grego, founder of Quintessential Capital Management and Nate Anderson, founder of Hindenburg Research. “We hope the company can turn a new leaf going forward.” Aphria officials said the company will adopt best practices to manage conflicts of interests, after it found some directors had not fully disclosed their conflicts to the board, as part of several recommendations put forth by the review committee. The board will also be fully composed of independent directors once the company appoints a permanent CEO, the company said. Simon will stand in as interim CEO starting March 1.

The corporate restructuring comes as the company faces a hostile takeover effort from Green Growth Brands Inc. launched in late December. Aphria’s shares were up 63 cents (5.23 per cent) Friday on the Toronto Stock Exchange, closing at $12.68.