Canadian cannabis company Aleafia Health and U.S. multistate operator Red White & Bloom Brands have called off a proposed merger announced in June.
The scrapped merger would have seen financially distressed Aleafia – which launched a strategic review in May after breaching the terms of a loan – swap shares with Red White & Bloom (RWB), with RWB’s shareholders owning the majority of the combined company.
The deal required approval from holders of Aleafia convertible debentures, who would have had those outstanding debts settled.
Some holders of the convertible debentures supported the deal, Aleafia said in a Friday news release.
But other holders, representing more than a third of the outstanding debentures, “have communicated to Aleafia and RWB that they will not accept the terms of the settlement set out in the (merger) agreement,” the company added.
As a result, the deal could not be completed.
Aleafia remains in breach of the terms of a senior secured debt agreement, with that debt now owned by RWB.
Although “RWB has not, to date, taken steps to formally note Aleafia in default or immediately enforce its security, RWB has not waived any outstanding breaches and has reserved all of its rights and remedies under the Aleafia senior secured loan agreement and related security,” said the news release.
“RWB is currently considering all available options.”
In the meantime, Aleafia said some members of its board of directors “continue to explore and evaluate potential strategic alternatives that may be available to Aleafia with the goal of maximizing value for Aleafia stakeholders.”
Shares of Aleafia trade as AH on the Toronto Stock Exchange, where they opened at CA$0.02 on Monday.