A major player in Canada’s cannabis industry is acquiring one of only seven legal Florida medical marijuana cultivators through a complicated purchase that according to one analysis values a state cannabis license at close to $200 million.
Aphria, a publicly traded firm based out of Ontario, plans to invest $25 million in a shell that will purchase most or all of the assets of Chestnut Hill Tree Farm, the Alachua nursery that operates CHT Medical. Aphria, which is now expanding into the U.S. market, will combine its cash with $35 million raised through a private placement in order to purchase and operate the company.
That placement, at $2.08 a share, implies a market cap of $177 million and suggests Aphria’s investment — which includes a 3 percent royalty on sales, plus shares — is worth $67 million, according to an analysis by Canadian investment dealer Eight Capital. Once the deal is completed, Aphria will retain 37.6 percent ownership in the state’s newly formed operator, which will be known as Liberty Health Sciences and operate under the brand of Aphria USA.
“Aphria’s success story is no longer limited to Canada,” CEO Vic Neufeld said in a press release.
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The pending agreement offers the most complete information to date on the value currently associated with Florida’s limited medical marijuana licenses, despite their current lack of income under a restrictive system. Chestnut’s CHT Medical, which won its license through a competitive process, has only been in operation since January, but the business has an implied value as the state’s number of eligible patients begins to expand following the November passage of Amendment 2.
As that expansion begins — and lawmakers weigh whether to expand the number of cultivation and distribution licenses — most of Florida’s marijuana cultivators are bringing in investors and raising capital for expansions. But so far, only Costa Farms of Modern Health Concepts has officially sold any stake in its company, and that purchase by Palliatech was for a minority.
The Aphria deal raised anew criticisms Wednesday about the state’s licensing process, and its ability to control who buys into the market. Ben Pollara, executive director of Florida for Care, the group behind the constitutional amendment, said the size of the acquisition reflects expectations that the state will keep tight reins on competition.
“It shouldn’t come as a surprise that big marijuana from Canada is pumping big money into Florida’s big, politically influential marijuana growers,” Pollara said in a statement to The Herald. “The legislature is on the precipice of sanctioning a monopoly of growers like the socialist government of Canada has done. The result will be a loss for everyone but the companies themselves.”
But for now, it’s unclear exactly how the acquisition will affect the listed ownership of Chestnut Hill Tree Farm, the official holder of the CHT Medical Florida license. In its press release, Aphria said the acquisition will allow Liberty Health Services “to indirectly hold and operate the assets of Chestnut.”
On Wednesday, a spokeswoman for the Florida Department of Health, which must approve any change in ownership, said nothing has been submitted to the state.
“Chestnut Hill has not requested approval nor received approval of a change in ownership,” Mara Gambineri wrote in an email. “Dispensing Organizations are held to the representations made in [their] applications, including representations as to ownership. Therefore, the Department could not approve a wholesale change in ownership or the complete sale of a license.”
Chestnut Hill Tree Farm owners Deborah Gaw and Robert Wallace did not return phone calls and an email Wednesday. An attempt to reach Aphria on the phone and through email was similarly unsuccessful.