Aleafia Health Inc. is taking a 9.9-per-cent stake in a retail joint venture with Serruya Private Equity – a much smaller position than initially planned due to Ontario’s retail ownership restrictions for licensed producers (LPs).
Aleafia had expected to take 51-per-cent stake in One Plant, the new retail company, when the deal was announced in September. The Serruya family, well-known retailers and cannabis investors, would have owned 49 per cent.
Shortly after the announcement, however, the Ontario government said that it would severely limit LP ownership of retailers; these rules were clarified last week to state that no more than 9.9 per cent of a retail store can be owned by one or more LPs.
“The cannabis regulatory environment is changing constantly. A key metric of success is being able to adapt quickly and avoid costly mistakes, and we’ve done just that,” said Aleafia CEO Geoffrey Benic in an e-mail.
“We are pleased that the Ontario Government has provided definitive clarity on ownership limits and we structured a deal that we believe provides the best possible outcome possible for a federally Licensed Producer,” he added.
Under the new arrangement, announced Wednesday, the Serruya Private Equity will own 90.1 per cent of One Plant, which plans to open 20 stores in Ontario after bricks-and-mortar retail goes live in April. That number will grow, said Mr. Benic, adding that “the limit of 75 retail licenses per owner was higher than expected and welcome news for Aleafia and our partner.”
Along with the retail JV, Aleafia and the Serruya’s have partnered to launch a brand house, Flying High Brands Inc., to bring established cannabis brands to Canada.
“The brands JV holds the international rights to a roster of commercial proven cannabis brands across multiple consumer categories,” Mr. Benic said. “In the near term, Aleafia intends to produce, process, label and ship these brands to our retail network and along with listing them with provincial distributors.”
As part of the deal, the Serruya Private Equity invested $10-million in Aleafia, acquiring 5 million shares at $2 a share.