Stem Holdings Inc. agreed to acquire Seven Leaf Ventures Corp. and units by way of a three-cornered amalgamation.

Under the terms of a definitive agreement, Stem will acquire all of the outstanding common shares of Seven Leaf in exchange for 13.0 million Stem common shares.

Seven Leaf struck a deal to buy a medical dispensary in the greater Sacramento, Calif., area, with closing expected in early 2020. The company also has an option to purchase a dispensary in Los Angeles.

Seven Leaf agreed to a contractual lock-up whereby Stem will release 25% of its consideration shares to Seven Leaf two business days following the closing of the Sacramento dispensary deal, with the rest of the Stem shares being released 90 days after the release date.

Stem's acquisition of Seven Leaf is subject to receipt of all required shareholder, regulatory approvals and approval of the debenture holders of Seven Leaf, among other closing conditions.

Following the deal's completion, Seven Leaf CEO Arthur Kwan is expected to join Stem's board.