CANNABIS PROFESSIONAL, The Globe and Mail
VANCOUVER, Oct. 29, 2018 – Bevo Agro Inc. shares surged nearly 70 per cent on Thursday, in the company’s first day of trading since announcing, earlier in the month, plans to merge with Sun Pharm Investments Ltd, owner of cannabis grower Zenabis Ltd.
The reverse takeover of Bevo by privately held Sun Pharm will see the creation of a new company called Zenabis Global Inc., focused on both cannabis production and agricultural plant propagation (Bevo’s traditional business). Sun Pharm shareholders will take 86 per cent of the new company, while shareholders of Bevo will get 14 per cent of the new venture.
The merger will create what could become one of the largest cannabis companies in Canada by production space. Zenabis, Sun Pharm’s existing licensed producer, already has three indoor growing facilities, in B.C. and New Brunswick (already licensed) and in Nova Scotia (not yet licensed). Together, these facilities have more than 600,000 sq. feet of production space, although only about half of that has been licensed by Health Canada, according to Zenabis CEO Rick Brar.
The Bevo merger massively expands the growing potential of Zenabis, one of the last large LPs to go public. Bevo currently has 2.8 million sq ft. of greenhouse space in Langley, B.C. This will be steadily converted from its current use – growing baby poinsettias, herbs, cucumbers and tomatoes – to cannabis production over the coming years. Mr. Brar expects to convert 500,000 sq. ft of greenhouse space to cannabis in the first six months post-merger.
The new company won’t, however, abandon Bevo’s traditional business, which remains profitable, said Mr. Brar. Last year Bevo reported a net income of $2.7-million on $32.7-million in revenue. As Bevo’s greenhouse space is converted to cannabis, the company will acquire new greenhouse space on other properties for traditional plant propagation.
“We plan on investing over $100-million to retrofit that facility for cannabis. And we plan on adding an additional 2.8 million square feet in the coming years,” said Mr. Brar. “For every square foot that’s dedicated to cannabis we’ll be augmenting that with additional square footage.”
If Zenabis Global converts the entire 2.8 million square feet to cannabis production, it could have one of the largest cannabis greenhouse footprints in the country, comparable to companies like Aphria Inc. and Canopy Growth Corp. That means a lot more low-cost, commodity-grade cannabis coming onto the market in the coming years.
Zenabis plans to navigate domestic oversupply and price compression by feeding the international medical cannabis market, said Mr. Brar. It will pace its greenhouse conversion depending on European demand.
“We feel that right now is the right time, and we think top spot is wide open; we don’t think there’s a clear leader in the space,” said Mr. Brar. “We’ve built a real business, with tangible assets, and with real contracts; now’s the right time for us to come to market, and we plan on being in top spot.”
Sun Pharm raised roughly $57-million in connection with the transaction, mostly by issuing convertible notes. Before the transaction, the company had secured roughly $72-million from Mr. Brar, two other co-founders, and a “small group of very strategic investors,” Mr. Brar said.
The merger has been approved by shareholders controlling 58 per cent of Bevo shares, but the transaction still needs the green light from the TSX Venture Exchange and the BC Supreme Court. It’s expected to close in December, and the merged company will continue trading under the ticker BVO.
About Bevo Agro
Bevo Agro is North America’s leading supplier of propagated agricultural plants, operating approximately 53 acres of state-of-the-art greenhouse facilities on 98 acres of land in Langley, BC and 20 acres of land in Pitt Meadows, BC. The company has entered into a binding agreement to acquire 10.4 acres of greenhouse space on 50 acres of land in Aldergrove, British Columbia (the “Greenhouse Acquisition”). The Company’s main products have been the propagation of vegetable plants such as tomatoes, peppers, cucumbers, and other plants such as bedding plants, flowers and grasses. The Company markets its products to established greenhouse growers, nurseries and retail outlets throughout North America.
About Sun Pharm
Sun Pharm has significant experience in agriculture, technology, pharmaceutical sales, consumer packaged goods, international distribution and brand marketing, with cannabis and cannabis-related purchase orders from the provinces of New Brunswick, British Columbia, Nova Scotia, and Yukon Territory. Sun Pharm is currently a privately-held cannabis company which has one of the largest, federally licensed indoor medical cultivation footprints in Canada, operating two licensed production facilities in British Columbia and New Brunswick, with a third expected to be coming online shortly in Nova Scotia. These facilities encompass 660,000 square feet of indoor pharmaceutical grade cannabis production space, strategically positioned on Canada’s coasts, facilitating national distribution and access to international markets. Sun Pharm is currently working towards globally recognized EU GMP certifications. Sun Pharm has a management team with decades of experience in the industry, with expertise in retail consumer packaged goods, global pharmaceutical sales and manufacturing, quality assurance, and commercialized cultivation. The growing team has more than two decades of experience in organic cultivation and distribution of herbs and nutraceutical products throughout the Americas, North Africa, and the Middle East. Sun Pharm’s sales team has more than two decades in product development, commercialization, and retail and pharmaceutical sales including international distribution.
For more information, visit: https://www.zenabis.com.