Transformational combination of expert
medicinal cannabis grower with a leading North American greenhouse
produce grower. Optimizes path to rapidly and cost effectively
scale to prominent competitive position for high quality, low cost
Canadian cannabis production.
VANCOUVER, June 6, 2017 /CNW/ - Emerald Health Therapeutics
Inc. ("Emerald") (TSXV: EMH) and Village Farms International, Inc.
("Village Farms") (TSX: VFF; OTC: VFFIF) today announced that they
have entered into a definitive agreement to form a Joint Venture
(the "JV") for large-scale, high-quality, low-cost cannabis
production. Under the terms of the agreement, Village Farms has
contributed a 1.1 million-square foot (25-acre) greenhouse facility
located on a 50-acre parcel of land in Delta, British Columbia (with ancillary
buildings) (the "Initial Greenhouse"). Subject to obtaining
necessary licensing, the Initial Greenhouse will be converted to
ACMPR (Access to Cannabis for Medical Purposes
Regulations)-compliant production and, if permitted by applicable
law and stock exchange requirements, production for the
non-therapeutic adult-use market. Emerald will initially
contribute, in multiple stages, an aggregate of $20 million in cash (of which $2 million was advanced at closing and the
remaining $18 million will be
advanced in tranches upon satisfaction of certain milestones to be
determined by the board of directors of the JV) to fund
conversion of the Initial Greenhouse and each party will have a 50%
ownership stake in the JV. (All figures are presented in Canadian
dollars.)
Highlights of the JV Agreement
- Village Farms is one of the largest and most experienced and
technically advanced greenhouse produce growers in North America, with its master grower team
having a combined 750 years of experience and an ingrained culture
of high-quality, low-cost greenhouse agricultural production;
- Emerald has significant cannabis industry experience and
assets, including a portfolio of diverse genetics and refined
standard operating procedures, with a flawless record of operations
under Health Canada's stringent ACMPR regime;
- Formation of the JV strategically positions Emerald for rapid
production capacity expansion in partnership with world-class
greenhouse operators, positioning it for the expected future
adult-use market and existing undersupplied medical cannabis
market;
- The JV has the goal to be the lowest-cost producer of high
quality cannabis in Canada;
- 1.1 million square feet of initial potential greenhouse
cannabis production (estimated to yield more than 75,000 kg of
product annually) upon completion of full licencing and
conversion;
- The JV has options to acquire from Village Farms up to 4.8
million square feet of greenhouse capacity, which is estimated to
yield more than 300,000 kg of cannabis annually and could supply a
considerable portion of expected future cannabis demand in
Canada or for export abroad;
- Formation of the JV is a transformational opportunity for
Village Farms that will initially see the conversion of one of its
existing Delta, BC greenhouse
assets to grow a substantially more profitable agricultural
product;
- The JV will help Emerald optimize raw material supply and cost
for downstream product development, specifically extraction-based
products, which is a rapidly growing segment of the Canadian
medical cannabis market and expected to be a meaningful part of the
non-therapeutic adult use market; and,
- Emerald continues to advance Phase 1 of its 32-acre Lower
Mainland (BC) property, with plans for a modular advanced indoor
growing operation (initially 50,000 square feet, expected to be
constructed by Q1 2018) aimed at cultivating premium quality
cannabis and housing a lab, processing facility, and other required
facilities for downstream product development.
"Diversification into cannabis production is a transformational
opportunity for Village Farms, with a portion of its Canadian
assets, to apply our core capabilities and expertise as a
technology-driven, low-cost, high-quality greenhouse grower and our
significant investment in our existing facilities to a product that
is vastly more profitable," said Michael
DeGiglio, Chief Executive Officer, Village Farms
International, Inc.
"Partnering with Village Farms, one of North America's largest and most
technologically driven greenhouse growers, on this tremendous
opportunity, is a very exciting development for Emerald," said
Avtar Dhillon, MD, Executive
Chairman, Emerald Health Therapeutics. "Village Farms is a global
leader in greenhouse growing and, importantly, an expert in the
complex matter of safety for agricultural consumables, which is a
critical competency in the production of cannabis. Together we have
the experience, expertise, and capital to become not only
Canada's, but one of the world's,
premier greenhouse cannabis growers."
The transaction closed concurrently with the signing of a
definitive agreement, at which time the JV leased (with the option
to buy) the Initial Greenhouse. The JV also entered into an
agreement with Village Farms for options to lease or purchase from
Village Farms a second 1.1 million square foot greenhouse (25 acre)
and a 2.6 million square foot (60 acre) greenhouse, both located
adjacent to the Initial Greenhouse. Combined, these three
greenhouse assets could provide the JV with total potential
aggregate production capacity of approximately 4.8 million square
feet (110 acres).
Emerald and Village Farms believe the potential conversion of
all of Village Farms' Delta, BC
greenhouse operations, if the options were exercised, could yield
more than 300,000 kg of cannabis annually. Emerald and Village
Farms believe this has the potential to fill a substantial portion
of the potential Canadian production gap for both medical and
non-therapeutic adult-use cannabis.
The JV will as soon as possible initiate the process to obtain a
Health Canada license to grow cannabis under ACMPR regulations and
concurrently commence the process of converting the Initial
Greenhouse for cannabis cultivation.
Any additional capital requirements of the JV are to be
contributed on a pro-rata basis by Village Farms and Emerald, or by
outside third-party funding.
Conference Call
Village Farms' and Emerald's management teams will host a joint
conference call tomorrow, Wednesday, June 7,
2017, at 10:00 a.m. ET to
discuss today's announcement. Participants can access the
conference call by dialing (647) 427-7450 or (888) 231-8191, or via
the Internet at http://bit.ly/2qXtHYQ.
For those unable to participate in the conference call at the
scheduled time, it will be archived for replay both by telephone
and via the Internet beginning approximately one hour following
completion of the call. To access the archived conference call by
telephone, dial (416) 849-0833 or (866) 859-2056 and enter the
passcode 35029750 followed by the pound key. The telephone replay
will be available until Wednesday, June 14,
2017 at midnight.
About Village Farms International, Inc.
Village Farms International, Inc. is one of the largest and
longest-operating vertically integrated greenhouse growers in
North America and the only
publicly traded greenhouse produce company. With more than 750
years of accumulated master grower experience coupled with advanced
proprietary technology and environmentally sustainable growing
practices, Village Farms is highly resource efficient and is one of
the lowest-cost, highest-quality growers of hydroponic produce in
the U.S. and Canada.
About Emerald Health Therapeutics Inc.
Emerald Health Therapeutics wholly owns Emerald Health
Botanicals, which holds a License under the ACMPR to cultivate and
sell medical cannabis and oils out of its facility located in
Victoria, British Columbia.
Emerald's focus is on extraction and downstream product
development, with a strategy of purchasing cannabis from high
quality low cost producers, such as the JV. Emerald is also
developing an indoor production facility on 32 acres in the Lower
Mainland (BC) to grow its unique strains of cannabis with the
intention of treating medical conditions and developing consumer
products.
Financial and Legal Advisors
National Bank Financial acted as financial advisor to Village
Farms and Torys LLP acted as legal advisor to Village Farms and
McCullough O'Connor Irwin LLP acted as legal advisor to Emerald
with respect to the JV transaction.
Cautionary Statements Regarding Forward Looking
Information
Certain statements in this press release constitute
forward-looking statements, within the meaning of applicable
securities laws. All statements that are not historical
facts, including without limitation, statements regarding future
estimates, plans, programs, forecasts, projections, objectives,
assumptions, expectations or beliefs of future performance, are
"forward-looking statements".
We caution you that such "forward-looking statements" involve
known and unknown risks and uncertainties that could cause actual
and future events to differ materially from those anticipated in
such statements. Forward-looking statements include, but are not
limited to, completion of licensing for the Initial Greenhouse and
the additional facilities discussed herein; conversion of the
Initial Greenhouse and the additional facilities discussed herein
to ACMPR-compliant cannabis production; rapid production capacity
expansion; estimates of production of cannabis at the Initial
Greenhouse and the additional facilities discussed herein; the
development and potential size of a non-therapeutic adult-use
market for cannabis and cannabis extracts; growth of demand for
cannabis extracts in the medical and non-therapeutic adult-use
market; build out of Phase 1 of the Company's indoor growing
facility and the details thereof; contributions of cash to the JV;
the JV becoming one of the world's premier greenhouse cannabis
growers; the production gap for medical and non-therapeutic
adult-use cannabis; and expected timing of any of the above
matters.
Emerald Health Therapeutics Inc. does not intend, and does
not assume any obligation, to update these forward-looking
statements except as required by law. These forward-looking
statements involve risks and uncertainties relating to, among other
things, failure to obtain required approvals under the ACMPR and
other applicable laws and regulation; failure to obtain necessary
financing; failure of the Canadian federal government to approve
legislation legalizing sales of non-therapeutic adult-use cannabis;
other regulatory changes; demand for cannabis generally in
Canada; competition in the
Canadian market for cannabis; difficulties in construction or in
obtaining qualified contractors to complete greenhouse retrofits;
actual operating and financial performance of facilities, equipment
and processes relative to specifications and expectations; and
other risk factors described in the Company's annual information
form and other filings with the applicable Canadian securities
regulators, which may be viewed at www.sedar.com. Actual
results may differ materially from those expressed or implied by
such forward-looking statements.
"Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release."
SOURCE Emerald Health Therapeutics, Inc.