Two licensed producers are coming together in Canada’s latest cannabis industry merger.
Mississauga, Ontario-based The Green Organic Dutchman Holdings and Vancouver-headquartered BZAM Cannabis said Wednesday they entered into a binding agreement to combine their businesses.
After the merger closes around Nov. 3, the new company would be the sixth-biggest licensed producer in Canada by sales, according to the companies.
Green Organic Dutchman CEO and interim Chief Financial Officer Sean Bovingdon told MJBizDaily the holding company will still be called The Green Organic Dutchman Holdings in the short term.
However, he said, “we have shareholder approval already to change the corporate holding company name and will look to do so after closing the transaction once we have completed our research and diligence on potential names.”
BZAM is privately owned by a sole shareholder; Green Organic Dutchman shares are traded as TGOD on the Canadian Securities Exchange.
The BZAM shareholder would own about 49.5% of the issued and outstanding shares of the combined company on closing, according to a news release.
In calendar 2021, TGOD and BZAM generated net revenue of 30.2 million Canadian dollars ($24 million) and CA$32.2 million, respectively.
The merged company is expected to create at least CA$10 million in annual “cost synergies” in “the key areas of cultivation and production, cannabis and product purchasing, sales, marketing and corporate expenses,” according to the release.
The combined company will be led by the following executives:
- BZAM’s current chief executive, Matt Milich, and chief commercial officer, Jordan Winnett, will serve as CEO and CCO, respectively, of the new company.
- TGOD’s Bovingdon will be CFO.
- The new board will consist of seven members, including five from TGOD’s current board.
Per the deal, the BZAM shareholder will be entitled to earn up to CA$33 million in shares pending the achievement of certain milestones, which include annual net revenue and positive adjusted EBITDA targets.
“Our highly complementary businesses in terms of production footprints, products and distribution networks create a Combined Entity with a leading branded product portfolio along with significant synergies across our operations,” Bovingdon said in a statement.
TGOD’s accumulated losses to date total almost CA$500 million.