Court Approves Red White & Bloom's Stalking Horse Bid For Aleafia's Sale And Investment Solicitation Process

Ontario Superior Court of Justice (Commercial List) has approved a stalking horse asset purchase and share subscription agreement pursuant to which Red White & Bloom Brands Inc. RWBYF RWB would acquire certain assets from Aleafia Health Inc. ALEAF and subscribe for shares of certain subsidiaries of Aleafia Health if RWB becomes the successful bidder pursuant to the sale and investment solicitation process (“SISP”) also approved by the Court in connection with the proceedings of Aleafia and certain of its subsidiaries (collectively, the “Aleafia Group”) under the Companies’ Creditors Arrangement Act.

As part of the Aleafia CCAA Proceedings, Aleafia obtained an order from the Court approving, among other things, an extension of the stay period until October 31, 2023; the SISP submitted by the Aleafia Group and KSV Restructuring Inc. in its capacity as monitor in the Aleafia CCAA proceedings; the stalking horse agreement; and the preservation and maintenance of the Aleafia Group’s Health Canada and cannabis excise licenses until the expiration of the stay period, including the ability of the Aleafia Group to sell cannabis in the ordinary course under the licenses and, to the extent any license may expire during the stay period, an extension of such license by a period equal to the stay period.

The stalking horse agreement provides for a reverse vesting transaction whereby a wholly-owned subsidiary of RWB would subscribe for shares of Emblem Cannabis Corporation, Canabo Medical Corporation, Aleafia Farms Inc. and Aleafia Retail Inc. and acquire specific intellectual property owned, licensed or leased by Aleafia Health. Certain excluded assets and liabilities of the Aleafia Purchased Entities would be transferred to one or more corporations that would not be included among the Aleafia Purchased Entities at closing. RWB’s subsidiary would be the sole shareholder of the Aleafia Purchased Entities following closing.

The consummation of the transactions contemplated under the stalking horse agreement are subject to satisfaction or waiver of certain conditions set forth in the stalking horse agreement, including, among other things, the Court granting the requisite approval and vesting order as a final order, the stalking horse agreement being determined to be the successful bid under the SISP, receipt of all required regulatory approvals and the licenses being in good standing and continuing in good standing and not suspended or terminated following the closing date.

There is no assurance that RWB’s stalking horse bid will be the successful bid under the SISP. If RWB’s stalking horse bid is unsuccessful, the stalking horse agreement will terminate. Any alternative successful bid would result in the repayment in full of all amounts outstanding under the Aleafia senior secured loan agreement and the DIP loan in addition to the payment of an expense reimbursement of up to $500,000 associated with transaction costs incurred by RWB in connection with the preparation of RWB’s stalking horse bid.

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