T.O. pot producer paying $76M for local grower
As Canada prepares to legalize recreational pot, “everybody is jockeying for position leading up to Oct. 17,” said the spokesman for a Leamington pot producer being eyed for takeover by a Torontobased medical marijuana producer and distributor.
Emblem Corp., headquartered in Toronto but with production facilities in Paris, Ont., has signed a “letter of intent” to purchase Natura Naturals Inc., a former greenhouse grower of tomatoes and cucumbers that has been transitioning to cannabis production. The estimated value of the Leamington acquisition is $76 million, according to a joint news release from the two companies. A spokesman for Natura, who asked not to be named due to a “blackout period” on information sharing before the actual sale, said Wednesday the purchase should be finalized “very soon.” Natura Naturals, with about 50 employees in Leamington, was owned by Claudio Mastronardi, a founding partner of agricultural greenhouse operation MCM Acres who died of a sudden heart attack in June at age 46.
Last September, Natura was issued a cannabis cultivating licence by Health Canada and has since been converting its 662,000-square-foot hydroponic operation into a medical marijuana-growing facility.
As of this week, there are 115 licensed producers in Canada, more than half of which (62) are located in Ontario. All of those with cultivation and sales licences will also be approved to grow and supply the recreational market, which is expected to generate billions in annual sales in Canada.
Natura Natural’s greenhouse operation is next door to Aphria Inc.’s Leamington base. Emblem Cannabis Corp., with lab and processing facilities in Paris, has a current market capitalization of about $127 million, compared to Aphria’s $2.4 billion.
Ethan Karayannopoulos, spokesman for investor relations at Emblem, said the goal is to have Natura’s Leamington cannabis output used to supply Emblem’s Paris operations. He said the company’s longer-term strategy is to focus on value-added products such as edibles, topical creams and infused beverages — all of which will remain illegal after Oct. 17 but which are expected to eventually be approved.
The Natura spokesman said the company is “in constant growth mode” and is likely to continue hiring “for the coming months.” Job openings now posted online at indeed.ca, include those for greenhouse workers ($14 an hour) and production/packaging associates ($16 an hour).
Under a phased conversion, Emblem anticipates up to 15,000 kilograms of annualized cannabis production at Natura in 2018. Once fully built out in 2019 and federally approved, the company estimates the Leamington facility will have an annualized cannabis production capacity of about 70,000 kg. The company reports it already had $3 million in equity investment in Natura and had entered into a supply agreement for 3,000 kg per year. The new acquisition deal includes mortgage financing, common shares and $25 million in cash.
In light of the Leamington transaction, Karayannopoulos said Emblem is suspending previously announced plans for three 100,000-square-foot production facilities on 80 acres of industrial land purchased in Paris for $7.7 million.
Industry observers say much changed since the June election of Doug Ford’s Progressive Conservatives in Ontario and the government’s announcement Monday that Canada’s biggest province would allow a private-sector component to retail sales of cannabis. Under the previous Liberal government scheme, Windsor, for example, was looking at a single public retail outlet to serve the region. While the Tories have delayed until April the opening of the first bricks-and-mortar private-sector pot stores, a number of initial retail offerings are expected — not only in Windsor but in surrounding municipalities as well.
“It’s huge,” Aphria CEO Vic Neufeld told the Star. “I wouldn’t be surprised if there’s thousands of (Ontario retail store) applications.”
Windsor Mayor Drew Dilkens is also encouraged by the move away from an LCBO -type public model to a private-sector retail model. “Anytime you let the free market be creative and do what it does best, it’s the better way to go,” he said. There are still a lot of unknowns about how the legalized pot marketplace will function in Ontario. The province has said it will begin public consultations next week.