Village Farms buying balance of Pure Sunfarms as cannabis M&A ‘improving’

Village Farms International is acquiring all the outstanding shares of cannabis producer Pure Sunfarms it does not already own.

Vancouver, British Columbia-based Village Farms, which controls 58.3% of Pure Sunfarms, has reached a definitive agreement to buy the remaining stake from Emerald Health Therapeutics.

After the deal closes – expected in late October – Village Farms International will own 100% of Pure Sunfarms.

Village Farms will finance the transaction, valued at 79.9 million Canadian dollars ($61 million), with CA$60 million in cash and a promissory note worth CA$19.9 million, due six months after the deal closes.

Village Farms and Emerald Health Therapeutics settled a dispute involving Pure Sunfarms earlier this year.

The deal could mark a turning point for mergers and acquisitions in the cannabis space, which slowed considerably so far this year.

Completed M&A transactions year-to-date have fallen 85% compared to the same period in 2019, according to Viridian Cannabis Deal Tracker, which follows M&A in the cannabis industry.

“We continue to see anecdotal evidence that the M&A climate is improving from the increased numbers of letters of intent and increased due diligence activity,” Viridian wrote in a note published just before the Pure Sunfarms deal was announced.

Pure Sunfarms has been one of the top-selling producers in Ontario, according to data from the Ontario Cannabis Store.

The company has generated six consecutive quarters of net income, Village Farms said in its news release.

Village Farms also said it signed definitive agreements to raise US$49.8 million in capital via a registered direct offering with institutional investors for the purchase and sale of 9.4 million units.

Each unit consists of one common share (sold at a public offering price of US$5.30) and a warrant to purchase half of a common share at an exercise price of US$5.80. Those warrants will be exercisable next March.

Village Farms International trades as VFF on the TSX Exchange.

Emerald Health Therapeutics trades as EMH on the TSX Venture Exchange.