A lucrative deal that would place a private Fort Lauderdale equity firm at the center of Florida’s fast-growing medical marijuana market is at risk of collapsing amid allegations of “ransom demands” and a corporate coup inside a state-licensed pot dispensary.
According to the details of a lawsuit brought by politically connected Panhandle developer Jay Odom against his partners, the shareholders of the Chestnut Hill Tree Farm cannabis nursery in Alachua have splintered over the pending sale of the company’s assets to a new operator. A partnership between South Florida’s Delavaco Group and publicly traded Canadian cannabis conglomerate Aphria announced the planned acquisition this month, but infighting has jeopardized the chances of completing a sale by a June 1 deadline.
Odom’s attorney, Barry Richard, downplayed the significance of the lawsuit in an interview as a “garden-variety business dispute.” But the overall value of Aphria’s deal to effectively buy a Florida cannabis cultivation and distribution license — one of only seven in the state, for now — has been valued at $177 million, and thousands of future patients could be affected.
“Both sides are a little nervous,” Richard acknowledged.
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Both sides are a little nervous
attorney Barry Richard
Odom, whose push for a new airplane hangar led to the downfall of former state House Speaker Ray Sansom in the late 2000s, alleged in a civil complaint that troubles began last month after Delavaco Group executives raised the possibility of using an affiliate to buy shares in Chestnut Hill Tree Farm, which opened its marijuana operations in January under the name CHT Medical.
The marijuana dispensary’s directors, a group that includes Odom, CEO Robert Wallace, his wife Deborah Gaw, and attorney Robert Beasley, met and agreed to negotiate a sale. But after that, Odom says things went sideways.
According to the civil complaint, Beasley went rogue and began to negotiate personally with the Delavaco Group, asserting that as manager of companies invested in Chestnut Tree Hill Farm, he also held a right of first refusal under the company’s operating agreement to match any offer to buy shares. Odom says Beasley’s claims were “akin to ransom demands.”
In order to get around Beasley, Delavaco shifted course and chose to purchase CHT’s assets and manage them indirectly under a new corporation, a proffer Odom says was approved March 30. The group announced the deal on April 4, telling market investors that CHT Medical would turn over its operations to Aphria and Delavaco’s company, Aphria USA, in exchange for up to $60 million.
Court documents show the deal, at least initially, contemplated $16 million in compensation to Wallace and Gaw, and another $10.3 million to shareholders 420 Emerald Coast, CBD Equity and Odom’s JBMM Group.
But before the day was out, a Delavaco executive received an email: “We’ll see y’all in court.”
The message came from W. Todd Schweizer, a businessman helping Beasley in his negotiations with Delavaco Group. Schweizer, who is currently fighting a felony charge that he illegally abandoned a commercial dump years ago in Bay County, argued that Odom had voted to approve the sale of CHT Medical’s assets without proper approval from CBD Equity, in which ownership is split between Odom and EWA Properties, managed by Beasley.
On April 10, Schweizer, now purporting to be the manager of Beasley’s companies, said the company was prepared to exercise its right of first refusal to match the deal offered by Delavaco and Aphria.
He also contacted Florida’s Office of Compassionate Use on April 17 to tell them HSTM Equity, a company holding a convertible promissory note for Chestnut Hill Tree Farm shares, was exercising its right to buy into the company, triggering a legally required state review. Odom, once sentenced to six months in prison for federal campaign finance violations, accuses Schweizer of tortious interference in the sale of the company, and is asking a judge to approve an injunction barring him from “interfering” in the deal.
It’s just not worth it for me to talk to the press about this situation. At this point I have been completely shut out of company operations
Schweizer, however, told the Miami Herald that the company’s shareholders approved the purchase in a secret meeting in order to “serve their own financial interest.” Beasley said in a brief email that he has been “completely shut out of company operations.”
“This lawsuit is just a part of their bully strategy,” said Schweizer. “We have a right of first refusal that we exercised prior to this asset sale and hope to keep the ownership of this company solely by Floridians.”
Delavaco Group CEO Andrew DeFrancesco did not respond to an email and phone calls to the company’s Fort Lauderdale and Ontario offices. But Richard said neither Schweizer nor Beasley has a right of first refusal, since no shares are being sold in the deal. He also said Schweizer has never been an investor in the company.
Richard said it’s in the state’s best interest for the deal to go through, acknowledging that CHT Medical’s current owners don’t necessarily have the expertise to run a major healthcare operation serving thousands of patients and navigating federal laws that still consider marijuana illegal.
“They haven’t dealt with major distribution systems. They haven’t dealt with complex statutory regulations.,” he said. “I know the Legislature wants companies that can operate successfully. I think it’s to everybody’s benefit to bring in companies that know how to manage a distribution business.”