Village Farms International Acquires 70% of Québec-Based ROSE LifeScience

Published: November 16, 2021

Village Farms International Acquires 70% of Québec-Based ROSE LifeScience

Village Farms International, Inc. has acquired 70% ownership of privately-held, Québec-based, ROSE LifeScience, a leading vertically integrated branded cannabis producer, supplier and commercialization expert in the Province of Québec, effective today (“Closing Date”). The transaction is valued at up to C$46.7 million.  ROSE becomes the Québec operational unit of Village Farms’ Canadian cannabis business segment, with ROSE’s headquarters and the existing team remaining in Québec.

ROSE is a leading third-party cannabis products commercialization expert in the Province of Québec, acting as the exclusive, direct-to-retail sales, marketing and distribution entity for Entourage Health, Sundial, Tilray and The Flowr Corporation and 10 Québec micro and craft growers throughout Québec. ROSE also distributes to Québec retail its own brand of high-quality cannabis products. Tam Tams is grown and processed at ROSE’s Québec-based, Health Canada-licensed 55,000 square-foot Controlled Environment Agriculture (CEA), purpose-built facility in Huntingdon, which was commissioned in 2020. ROSE also enables a platform for commercialization in the Québec market for several Québec-based micro-producers under its DLYS brand.

Highlights of the Acquisition

  • Adds a substantial presence in the Province of Québec as a cannabis supplier, producer and commercialization expert in the Province of Québec, which represents approximately 15%1 of total Canadian retail cannabis sales at the current annualized run rate of more than C$627 million1, the vast majority of which is dried flower and pre-rolled products;
  • Adds experienced, Québec-based industry leaders who will join the Village Farms/Pure Sunfarms team, bolstering extensive existing relationships in the Québec cannabis market and leveraging specialized, deep experience in both consumer-packaged goods and regulated industries; and,
  • Adds a Québec-based, 55,000 square foot, Health Canada-licensed Controlled Environment Agriculture (CEA) cultivation and processing facility, which is included in the transaction.

Village Farms Management Commentary
“The acquisition of ROSE – by far the most successful Québec-based cannabis operator in our view – is a prudent and strategic means by which to enter, and rapidly ramp sales, in one of Canada’s largest provincial cannabis markets,” said Michael DeGiglio, CEO, Village Farms. “ROSE adds an exceptional group of Québec-based experts to our Canadian cannabis operations. The team has a proven track record of success, and shares our belief in the importance of cultivation excellence, as well as the advantage of innovation and continuous improvement. We look forward to building on ROSE’s strong foundation in the Québec market, with a long-term commitment to the Company’s Québec heritage.”

“ROSE immediately expands our reach to more than 90%1 of all Canadian retail cannabis sales and represents a major step forward in Pure Sunfarms’ strategy to become the leading national supplier of cannabis in Canada, with at least a 20% market share in the dried flower category,” said Mandesh Dosanjh, President and Chief Executive Officer, Pure Sunfarms.  “ROSE is very well respected in the Québec cannabis industry, with a reputation for leadership and brand strategy success that we have come to know well and respect. We look forward to pursing the new opportunities, both near-term and long-term, created by the addition of ROSE as our Québec-based cannabis operational unit.”

ROSE Management Commentary
“We have long admired the success of Village Farms and Pure Sunfarms in the Canadian cannabis industry. We are proud to join forces with them to accelerate our successes, and seize this opportunity to further evolve the industry in our home province of Québec,” said Davide Zaffino, co-founder and President and Chief Executive Officer, ROSE. “We cherish our Québec roots, and deeply believe in our province’s culture and values. As always, we remain committed to ensuring that Québec benefits from the responsible production, sale and consumption of cannabis. As part of the outstanding family of cannabis businesses within Village Farms, we are even better positioned to continue playing this leading role in the Québec landscape.”

Purchase Price
Under the terms of the Share Purchase Agreement, Village Farms acquired 70% of all outstanding shares of ROSE on a debt-free basis for a consideration comprised of cash and a total of 2,411,280 common shares of Village Farms (“Village Farms Shares”) being (i) C$19.9 million in cash, (ii) Village Farms Shares in the total value of C$26.8 million. As part of the consideration, any existing ROSE material debt has been paid off in full.

The Village Farms Shares issued under the Share Purchase Agreement are subject to lock-up agreements, and subject to compliance with applicable securities laws, 33% of these shares will be released in four months, another 33% of these shares to be released after eight months and the remaining shares to be released after one year.

The co-founder and President and Chief Executive Officer of ROSE, Davide Zaffino, and co-founder and Chief Operating Officer of ROSE, Brian D. Stevenson (the “Management Shareholders”), who were among the sellers of ROSE in this transaction, will remain in their current roles with ROSE post-acquisition and have retained a 30% interest in ROSE (“Retained Interest”). In conjunction with the acquisition, Village Farms and the Management Shareholders have entered into an agreement providing Village Farms with a pathway to acquire the Retained Interest upon the occurrence of certain triggering events prior to March 31, 2025. The price for this call right was set at a multiple solely based on ROSE’s adjusted EBITDA performance of the applicable prior calendar year.

Notes

1. Statscan. Based on data as at August 31, 2021.

About Village Farms International, Inc.
Village Farms leverages decades of experience as a large-scale, Controlled Environment Agriculture-based, vertically integrated supplier for high-value, high-growth plant-based Consumer Packaged Goods opportunities, with a strong foundation as a leading fresh produce supplier to grocery and large-format retailers throughout the US and Canada, and new high-growth opportunities in the cannabis and CBD categories in North America and selected markets internationally.

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