Originally published September 6, 2019 on OrganicBiz
Edmonton’s Aurora sells stake in The Green Organic Dutchman
A company growing organic cannabis in Ontario for markets worldwide sees improved balance sheets ahead after one of its shareholders in the industry sold its stake in the firm.
Edmonton producer and processor Aurora Cannabis announced Wednesday it has sold its 10.5 per cent stake in Toronto-based The Green Organic Dutchman to a syndicate of Canadian banks for $3 a share, or an aggregate gross of $86.5 million.
The Green Organic Dutchman said the deal “significantly improves” its revenue and gross margin mix, as it allows for the “repatriation” of organic cannabis the company previously earmarked for Aurora under the investor rights agreement it had with the Edmonton firm.
That agreement had also included a revenue sharing model with Aurora, which “would have lowered TGOD’s average selling price and margins,” The Green Organic Dutchman said.
From the seller’s viewpoint, its stake in The Green Organic Dutchman “became less important to our core strategy” when it bought full control of another organic cannabis producer, Whistler Medical Marijuana Corp., in an all-stock deal in March, Aurora CEO Terry Booth said in that company’s release.
“Our return on our TGOD investment is significant and will add non-dilutive capital and further enhance our strategy to remain a dominant force in the global cannabis industry,” Booth said.
All that said, “Aurora has been an excellent partner during TGOD’s initial development phase; their investment played an important role in our success,” TGOD CEO Brian Athaide said in a separate release.
“The relationship added significant value across multiple areas of the business, including the initial design and construction of our Canadian facilities.”
TGOD’s Canadian operations include an organic facility in the Hamilton area at Ancaster, Ont., and another at Valleyfield, Que., southwest of Montreal. It received approval Tuesday from Health Canada to expand operations into a new hybrid greenhouse in Hamilton.
Outside Canada, the company has facilities under construction in Jamaica and Denmark.
Aurora’s stake sale, Athaide said, “is the right next step in the relationship as both companies mature and our respective strategies evolve. It also improves TGOD’s revenue and margin potential on the sale of our premium organic cannabis.”
Under the terms of the deal, Aurora retains TGOD warrants which, if exercised, would equal a stake of about five per cent in the company.
TGOD, whose focus is on the Canadian adult-use organic cannabis market and medical cannabis markets in Canada, Europe, the Caribbean and Latin America, also has organic hemp CBD oil operations in Canada and a subsidiary, HemPoland, distributing hemp CBD oil in the European Union.