In an agitating move, two Canadian cannabis companies have made recent moves to offload operational facilities.
The two firms are looking to dispose of these assets at low prices, compared to the previous valuation attached to licensed cultivation operations in Canada.
On Saturday (January 4), The Deep Dive reported on a new listing through Cushman & Wakefield of a former MedReleaf greenhouse based in Exeter, Ontario, for a price tag of just under C$17 million.
Aurora originally got its hands on the facility, which has a 105,000 kilogram annual production capacity, when it acquired MedReleaf in May 2018 in an all-stock transaction worth C$3.2 billion.
MedReleaf itself had purchased the 1 million square foot greenhouse a month prior to its acquisition for C$26 million.
The listing includes the 22 acre greenhouse, which sits on 70 acres of land, with an additional 95 acres of land available for C$2 million.
Though the listing isn’t explicitly labeled as an Aurora property, the address matches previous filings made by the company, according to The Deep Dive.
In an emailed statement to the Investing News Network (INN), Michelle Lefler, Aurora’s vice president of communications, confirmed the property for sale was indeed the one inherited by Aurora with its purchase of MedReleaf. Lefler added that the firm took time to evaluate the potential of the greenhouse for research and extraction purposes but “concluded that this non-operational greenhouse would require retrofit and significant capital investment in order to meet Aurora’s production standards.”
Lefler told INN that the planned sale of the Exeter facility is a part of Aurora’s goal to rationalize capital expenditure with concerns to its cultivation footprint.
“We expect that our production capacity, including the anticipated completion of 6 grow rooms at Aurora Sun, to be sufficient for near term demand,” said Lefler.
The news comes after Aurora told investors it would be halting the construction of two of its planned facilities to save a total of C$190 million in November.
Aurora’s share prices slipped 4.3 percent on Monday (January 6) and currently sit at C$2.48 as of 1:13 p.m. EST.
Golden Leaf is also relieving itself of some of its assets.
On Monday, the firm announced it would be selling its two Canadian subsidiaries, Medical Marihuana Group Corporation (MMG) and Medical Marijuana Group Consulting (MMC), to global cannabis company Sensi Brands for a total of C$3.4 million. The firm said the move was in preparation to shift towards the more “attractive” markets in the US, where operations have seen more lucrative cash flows.
Sensi Brands received all of the outstanding shares of MMG and MMC, while Golden Leaf will obtain C$1.8 million in cash, C$200,000 in an unsecured loan and C$1 million in a secured vendor take-back loan.
The sale includes the passing of Golden Leaf’s mortgage debt of C$400,000, as well.
Golden Leaf said that, while MMG consumed about C$475,000 in cash during Q3 2019, it recorded zero dollars in sales.
The company also said the sale of MMG and MMC helped strengthen its balance sheet, while maintaining its right to sell its proprietary line of Chalice Farms products in Canada, subject to the receipt of approval from Health Canada, the country’s federal cannabis regulator.
The company currently oversees operations in Nevada and California and dispensaries under its Chalice Farms brand across the Oregon market.
According to the US asset operator, this sale will be enough to fund its “key ongoing operations,” so it may meet its fiscal 2020 goals.
Over the past six months, shares for Golden Leaf have seen a steep decline of 71.4 percent, and prices opened at C$0.02 on Monday.
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Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
As investors continue to prioritize cannabis opportunities in the US, market watchers expect mergers and acquisitions (M&A) to play a role in the future for Canadian companies.
A consolidation trend has been expected in the Canadian cannabis space for some time now based on the size of the market compared to the number of operations in the country.
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