Marijuana multistate operator Red White & Bloom Brands plans to acquire financially troubled Canadian cannabis operator Aleafia Health in a share-exchange agreement.
The proposed deal comes less than two weeks after Aleafia announced it had launched a strategic review after breaching the terms of a secured loan.
That loan has been assigned to Toronto-based Red White & Bloom (RWB), according to a Wednesday news release.
RWB will provide a $17.5 million credit facility to Aleafia as part of the deal and plans to sign a $30 million credit facility of its own.
Under the proposed share-exchange agreement, each Aleafia common share will be swapped for 0.35 RWB shares, giving Red White & Bloom shareholders roughly 76% of the combined company.
“The potential acquisition of Aleafia … provides a well-established distribution beachhead for RWB and its premium Platinum brand into the Canadian market, opens up the larger U.S. market to Aleafia’s select brands through RWB’s distribution and retail channels, and provides both companies with an opportunity to mutually leverage their respective competencies,” RWB Chief Financial Officer Eddie Mattei said in a statement.
Aleafia CFO Matt Sale said the deal “would recapitalize Aleafia’s balance sheet and provide our shareholders with access to a larger market capitalization and exposure to the U.S. recreational and medical cannabis markets.”
The deal is subject to court, regulatory, stock exchange and shareholder approval.
It is expected to close by the end of October.
Both companies are based in Ontario – RWB in Toronto and Aleafia in Vaughan.
RWB operates in such U.S. markets as Arizona, California, Florida, Illinois, Massachusetts and Michigan.
Shares of Aleafia trade as AH on the Toronto Stock Exchange.