Adam Jackson
Red White & Bloom Brands Inc. (CSE: RWB) (OTC: RWBYF) confirmed that it has emerged as the top bidder to acquire assets from Aleafia Health Inc., a development approved by the Ontario Superior Court of Justice.
The court’s nod in August outlined RWB’s proposal to buy certain items from the struggling Aleafia and also to invest in several of its subsidiaries. If all goes as planned, a subsidiary of RWB will have sole ownership of the Aleafia units.
However, the deal still has some hurdles. It hinges on the court’s final approval, slated for an Oct. 27 hearing. The parties expect, if approved, to wrap up the transaction no later than November 22. Another stipulation is ensuring Aleafia Health’s licenses remain in good standing.
During the upcoming court session, RWB anticipates Aleafia will seek an extension to finalize all related matters.
Leading up
In August, the Ontario Superior Court of Justice greenlit the asset purchase deal for RWB to acquire certain assets from Aleafia, tied to Aleafia’s bankruptcy proceedings.
RWB’s proposed bid comprises:
- A write-off of Aleafia Group’s outstanding $15.4 million loan from December 24, 2021.
- A discharge of Aleafia Group’s liabilities up to $6.6 million related to debtor-in-possession financing.
- A direct cash payment of $400,000.
- Legal expenses totaling $1.25 million, and $2.85 million for officers and directors fees.
- A $6 million payment for the secured lender, 1260356 Ontario Limited.
- Funds to cover priority payments under the CCAA as of the deal’s closing.
Aleafia’s decision to file for creditor protection under the CCAA — akin to bankruptcy proceedings in the U.S. — came in response to recurring losses and financial challenges, complicated by a cancelled acquisition proposal by RWB, which hit a snag on July 14, a month after the deal was announced.
The acquisition at the time was projected to save both firms approximately $10 million annually and boost the combined company’s revenues by 41%. However, the deal was contingent upon Aleafia shareholders endorsing a $6 million convertible debt settlement. Over a third of Aleafia’s shareholders declined the terms, causing the proposal’s downfall.
A week later, Aleafia obtained an order from the Ontario Superior Court for a financial and operational restructure under the CCAA, which also approved debtor-in-possession financing.
