Aleafia Health To Acquire Emblem Corp. In C$173 Million All Stock Deal

Aleafia Health Inc. (TSXV: ALEF) is acquiring Emblem Corp. (TSXV: EMC, OTCQX: EMMBF)  are in an all-stock deal valued at approximately $173.2 Million. The combination will create Canada’s largest medical cannabis clinic network with 40 clinics and education centers.

Aleafia’s stock slid slightly by 1% to $1.05, while Emblem’s stock jumped over 13% to lately trade at 81 cents on the OTC Markets.

As a result of the acquisition, Aleafia’s patients will get access to Emblem’s products including capsules, oils and oral sprays. They will also get access to the Emblem e-commerce platform. Aleafia will also get to use Emblem’s license to process medical cannabis products and sell these directly to the patients.

“The Emblem acquisition rapidly accelerates the execution of Aleafia’s strategy to become a vertically integrated, diversified cannabis company. It is difficult to overstate the significance of securing the highest quality medicine for our patients and Aleafia,” said Aleafia Health CEO Geoffrey Benic. “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.

Aleafia said that it expects to leverage Emblem’s approval to supply to the Provinces of Ontario, Saskatchewan, British Columbia and Alberta; national medical distribution through Shoppers Drug Mart; and national retail distribution through Fire & Flower, Starbuds and the emerging OnePlant network. The statement said that through Emblem’s joint venture with German pharmaceutical wholesaler Acnos Pharma GmbH, Aleafia will gain to access that medical cannabis market serving more than 82 million people, with access to approximately 20,000 pharmacies, along with access to Australia’s burgeoning medical cannabis market upon completion of Aleafia’s previously announced transaction with CannaPacific Pty Ltd.

“Emblem’s patient-focused product portfolio and strength in patient education, conversion and retention through GrowWise will be further bolstered by the patient acquisition capabilities of Aleafia’s Canabo clinics. The combination of the companies will form a fully integrated market leader in the medical cannabis sector, with industry-leading patient counts, and the ability to immediately capitalize on full revenue potential,” said Emblem CEO Nick Dean. “Furthermore, our renowned national brands, robust footprint in emerging value-added products, and strong domestic and international growth opportunities will cement our position of strength in this highly competitive market.”

Terms Of The Deal

According to the statement, the agreement calls for Emblem shareholders to receive 0.8377 of an Aleafia common share  in exchange for each Emblem common share, representing the equivalent of $1.21 per Emblem Share and a premium of 27.0% based on the closing prices of Aleafia and Emblem Shares on the TSX Venture Exchange on December 18, 2018. The shares were lately trading at C$1.40. When the deal is completed, it is expected that existing Aleafia and Emblem shareholders will own approximately 59.0% and 41.0% of Aleafia, respectively, on a fully diluted in-the-money basis.

Aleafia and Emblem said in the stament that they currently have access to a combined CAD $69.9 million in cash, to be used for continued product innovation and brand building, construction and development of their cultivation facilities and outdoor grow operations, to support expansion efforts and to pursue strategic opportunities and investments that maximize shareholder value.