Canadian Cannabis Grower RedeCan Restructures Deal to Sell Itself

Redecan Pharm

Alta Vista Ventures (CNSX: AVV) reported today that it has restructured the deal to acquire Canadian licensed cannabis producer RedeCan Pharm. The company originally announced its intent to purchase the Ontario company in late November. The initial deal would have given AVV 100% ownership in exchange for $9.5mm, including $7mm in cash and $2.5mm shares at a deemed price of $0.33 per share (7.58mm shares).  It also included a 10% royalty to be paid to the current RedeCan owners of 10%, paid equally in cash and stock.

The new terms eliminate the royalty and would give AVV a 90% ownership.  The price has been changed to $8mm cash and 9mm shares.  At a current price of $0.19 per share, the total deal value is $9.71mm.  The company expect to close the transaction by March 1st, though this deal is not yet definitive.  RedeCan had previously agreed to sell itself to another publicly-traded Canadian company, Abba Medix, but that deal failed to close. AVV described the company in a recent press release:


Redecan Pharm is located in the heart of the Niagara peninsula in Southern Ontario and currently utilizes 15,000 square feet of greenhouse space. RedeCan Pharm received its cultivation license in June of 2014 and was then issued its license to sell dry cannabis to medical patients across the country in March of 2015. RedeCan’s license is currently for the cultivation and sale of up to 317 kilograms of dried marijuana annually.


Since the transaction was announced on November 27th, the stock has returned to the post-announcement level following initial losses that almost breached the pre-deal closing price on 11/26 of $0.11:

AVV

Earlier this week, AVV disclosed that it had hired Jacob Capital Management to advise it on the deal.  This will add to the cost of the transaction, as it will pay Jacob a total of 4mm shares upon successful completion (with a minimum of 1.5mm shares).

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Breaking News by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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