Aleafia Health Inc. agreed to acquire Toronto-based medical cannabis company Emblem Corp. in an all-share deal valued at about C$173.2 million.
Emblem shareholders will receive 0.8377 of an Aleafia common share for every stock they hold in the Canadian company, valuing their holdings at C$1.21 each — a premium of 27% based on the closing prices of Aleafia and Emblem shares on the TSX Venture exchange on Dec. 18.
Existing shareholders of Concord, Canada-based Aleafia and Emblem will own about 59% and 41% of the combined company, respectively.
The deal was approved unanimously by Emblem's special committee and board of directors. The transaction will be effected through a plan of arrangement under the Canada Business Corporations Act and will require approved by almost 67% of the votes cast by Emblem stockholders.
Aleafia CEO Geoffrey Benic said the deal accelerates the company's strategy to become a vertically integrated and diversified cannabis company. "Emblem's product leadership in the medical and adult-use sectors and highly coveted supply agreements will perfectly complement Aleafia's cannabis production and clinic operations," Benic said.
Meanwhile, Emblem CEO Nick Dean said the company's portfolio and strength in patient education, conversion and retention will be bolstered by the patient acquisition capabilities of Aleafia's clinics.
Upon the deal's completion, two Emblem independent directors — Daniel Milliard and Loreto Grimaldi — will replace two directors on Aleafia's board.
The transaction also includes reciprocal non-solicitation provisions, which provides both companies the right to match any superior proposal or competing transaction for the other party. Aleafia or Emblem will pay C$10 million in fees if the deal is terminated in certain circumstances.
Gowling WLG (Canada) LLP is acting as legal counsel to Aleafia, while Deloitte advised the company on financial due diligence. Mackie Research Capital Corp. is acting as financial adviser to Aleafia.
Dentons Canada LLP is acting as legal counsel to Emblem, while Eight Capital is acting as financial adviser to the medical cannabis company. Echelon Wealth Partners Inc. is acting as financial adviser to Emblem's special committee, while Eight Capital and Echelon Wealth Partners Inc. have each provided a fairness opinion to the Emblem Board and special committee, respectively.