Red White & Bloom To Acquire Beleaguered Canadian Cannabis Operator Aleafia

Red White & Bloom Brands Inc. RWBYF and Aleafia Health Inc. ALEAF have entered into a binding letter agreement whereby Red White & Bloom (RWB) will acquire Aleafia and its subsidiaries in a share-exchange agreement.

RWB will provide a $17.5 million credit facility to Aleafia as part of the deal and plans to sign a $30 million credit facility of its own.
Under terms of the agreement, each outstanding common share in the capital of Aleafia will be exchanged for 0.35 of a common share in the capital of RWB, subject to customary adjustment. Upon the completion of the proposed transaction, existing RWB shareholders are expected to own approximately 76% of the combined company resulting from the proposed transaction. Aleafia shareholders are expected to own approximately 24% of the combined company.

Management Commentary

"The intended acquisition of Aleafia expands our footprint to the largest federally legal cannabis market globally," said Brad Rogers, CEO and director of RWB. "Combining our award-winning brands and IP with Aleafia's proven cultivation, manufacturing and distribution capabilities, creates one of the most dynamic cross-border companies in the industry. We continue to focus on delivering significant value to our shareholders and believe this transaction aligns with that commitment."

Aleafia CFO Matt Sale said the deal “would recapitalize Aleafia’s balance sheet and provide our shareholders with access to a larger market capitalization and exposure to the U.S. recreational and medical cannabis markets.”

Eddie Mattei, CFO of RWB called the potential acquisition a milestone for RWB.

"The potential acquisition of Aleafia represents a transformative milestone for RWB. It provides a well-established distribution beachhead for RWB and its premium Platinum brand into the Canadian market, opens up the larger U.S. market to Aleafia's select brands through RWB's distribution and retail channels, and provides both companies with an opportunity to mutually leverage their respective competencies in the areas of cultivation, procurement, product development, and sales and marketing," Mattei said.