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  • Cannara Biotech to acquire a licensed cultivation and manufacturing facility
  • The facility is being acquired through an all-cash offer of $27 million
  • Located in Valleyfield, Quebec, the newly built state-of-the-art facility spans over 1,033,506 sq. ft.
  • The transaction is expected to close on June 20, 2021
  • Cannara Biotech is a producer of premium-grade cannabis and cannabis-derivative products for the Quebec and Canadian markets
  • Cannara Biotech Inc. (LOVE) opened trading at C$0.165 per share

Cannara Biotech has entered into a definitive agreement to acquire a licensed cultivation and manufacturing facility.

The facility, in Valleyfield, Quebec, is being acquired from Medican Organic Inc., a wholly-owned subsidiary of The Green Organic Dutchman Holdings Ltd. (TGOD) through an all-cash offer of $27 million, plus the assumption of approximately $5.7 million of liabilities.

“With this acquisition, Cannara continues to increase its footprint and create more jobs in its home province of Quebec ,” said Zohar Krivorot, President & Chief Executive Officer of Cannara Biotech.

“Today’s announcement reinforces our position as one of Canada’s leading producers of premium-grade cannabis and cannabis derivative products.”

Located in Valleyfield, Quebec, the newly built state-of-the-art facility spans over 1,033,506 sq. ft. that will enable Cannara to reach an annual cultivation capacity of 125,000 kg of premium-grade cannabis.

“While already marked by a strong balance sheet, we believe that this transaction significantly bolsters our business fundamentals, including annual output, profitability and overall financial position,” said Nicholas Sosiak , Chief Financial Officer of Cannara Biotech.

“Underlying this acquisition is our confidence in the broader market for competitively priced premium-grade cannabis products and our intention to capture a significant share of it.”

Transaction highlights

  • Positions Cannara as one of Canada’s top leading cannabis companies: The fully licensed and automated Valleyfield Facility outfitted with climate control and growing systems is comprised of 24 independent growing zones, 200,000 sq. ft rooftop greenhouse and a 200,000 sq. ft cannabis 2.0 processing center.
  • Operational and cost synergies: The Valleyfield Facility and the Farnham Facility are within one hour drive from each other. The proximity of the Company’s two mega facilities will increase operational efficiencies, reduce costs and offer additional capacity utilization. As both assets are in Quebec, Cannara will continue to benefit from the province’s low cost of electricity. The company has been granted the “economic development rate” by Hydro-Québec and will therefore receive a reduction in electricity rates until March 31, 2027, which is expected to reduce operating costs at the facilities.
  • Continued growth in market share: The transaction allows Cannara to continue capturing market share in Quebec, Canada’s second-largest cannabis market.
  • Transaction funded through private equity placement priced at a premium to current market price: The Transaction is majorly funded through a private equity placement at $0.18 cents providing a free and clear title on the Valleyfield Facility.

The transaction is expected to close on June 20, 2021.

BMO Capital Markets acted as exclusive financial advisor to TGOD.

The acquisition will be financed by a non-brokered private placement of up to $35,000,000.

A total of $5.7 million will be raised by Cannara via a private placement. The unsecured convertible debenture will bear interest at a rate of 4% per annum, compounded semi-annually and payable along with the principal amount on the third anniversary of their issue.

Cannara Biotech is a producer of premium-grade cannabis and cannabis-derivative products for the Quebec and Canadian markets. Cannara owns two Quebec -based mega facilities spanning over 1,650,000 sq. ft., providing the Company with 125,000kg of potential annualized cultivation output.

Cannara Biotech Inc. (LOVE) opened trading at C$0.165 per share.

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