The Valens Company Expands Cannabis 2.0 & 3.0 Footprint with the Acquisition of Leading Canadian Edibles Manufacturer LYF Food Technologies Inc.

Published: January 26, 2021

The Valens Company Expands Cannabis 2.0 & 3.0 Footprint with the Acquisition of Leading Canadian Edibles Manufacturer LYF Food Technologies Inc.

The Valens Company Inc., a global manufacturer of cannabis derivative products, has entered into a definitive agreement to acquire all of the issued and outstanding shares of LYF Food Technologies Inc. (LYF) in a cash and share transaction for closing consideration of CDN$24.9 million, plus up to an additional CDN$17.5 million in consideration payable upon the business achieving certain earn-out EBITDA milestones. The LYF Acquisition is expected to be accretive to the Company’s EBITDA and diluted EPS in 2021, and if all of the Milestones are met, the transaction represents an approximate ~4.2x multiple on the last milestone achieved. With the LYF Acquisition, The Valens Company not only strengthens its already wide-reaching production capabilities for the 2.0 and 3.0 markets, but also unlocks significant growth potential with the addition of a cutting-edge platform designed to capitalize on one of the fastest growing product segments in the cannabis industry.

LYF is a premier edibles manufacturer based in Kelowna, British Columbia with expertise in novel product creation, white label manufacturing and infusion technologies. Similar to Valens, LYF operates a product development and manufacturing platform focused on consumer-driven innovation, and product safety and consistency. LYF brings a proven team with significant experience producing high throughput food products, in addition to experience operating and working with major Canadian grocery chains, health and wellness retailers, and pharmacies. Just minutes away from Valens’ headquarters, LYF’s purpose-built manufacturing facility produces innovative edible products using the highest quality ingredients and cannabis extracts, offered in proprietary delivery methods.

Valens’ access to low-cost active ingredients paired with LYF’s industry-recognized product IP formulations of over 100 recipes strengthens its capabilities to produce higher-margin, new-to-market edible formats in a segment with limited product variability, and increased consumer demand. With the added infrastructure and expertise from the LYF Acquisition, The Valens Company significantly expands its edibles footprint and strategy to remain a best-in-class manufacturing platform for its partners, while also increasing its ability to capture market share in the rapidly growing product category. Similar to consumer trends in the US cannabis market, edible products are anticipated to represent over 10% of sales in the maturing Canadian cannabis market.

Tyler Robson, Chief Executive Officer and Chair of the Board of The Valens Company, said, “LYF has set the standard of what high quality edibles should be and has developed a diverse and flexible manufacturing platform to play a dominant role in the Canadian edibles market. LYF stood out for its product innovation and marketing teams, as well as its broad range of edible products which will introduce new formats to Canadian consumers that are typically only available in more mature markets. We look forward to further developing our product offering to reach more consumers with high-quality and unique cannabis edibles as this product segment continues to gain in popularity.”

“Our team could not be more thrilled to join forces with The Valens Company and collectively fuel our shared passion for producing exceptional cannabis products with consumers top of mind,” said Paolo Pero and Matthew Amado, Founders of LYF. “As a fellow Kelowna-based company, Valens’ vision for global growth resonated with the team and ultimately led us to recognize the significant value in combining what we have each uniquely created to bring a new level of manufacturing excellence to Canada and beyond.”

Strategic Highlights

With the added capabilities from the LYF Acquisition, The Valens Company is better positioned to capture edibles category market share with the following key success factors:

  • Experienced team with a background in commercial-scale food manufacturing, cannabis processing, and a thorough knowledge in developing and producing innovative cannabis derivative products, specializing in confectionary goods. With combined industry knowledge and in-depth relationships with food ingredient, packaging, and equipment providers, Valens expects to boost its reputation in the market as a trusted third-party operator.
  • Expected to be an accretive transaction to both anticipated EBITDA and diluted earnings per share in 2021 with an earnout structure that effectively aligns the interests of all parties to drive financial performance and generate shareholder value.
  • Speed to market utilizing LYF’s existing infrastructure and relationships throughout the edibles community. With white label edible products currently available for purchase in British Columbia, LYF adds a fully operational platform and robust partner network ready for integration with Valens’ suite of products. In addition, LYF and Valens’ existing roster of new, innovative edible products with various partners remain ready for immediate commercialization and launch into the Canadian market. With the agility and speed to capitalize on this product segment, Valens sees both new and existing opportunities on the horizon.
  • Category-leading scale with over 77,000 square feet of licensed manufacturing space at Valens, including the addition of LYF’s 10,500 square feet nimble production facility in close proximity to the Valens K1 and K2 facilities to allow for ease of operational and management control and associated cost synergies. LYF brings an existing asset base with nearly CDN$10 million invested into the business to-date, including over CDN$5 million in property, plant, and equipment alone, a standard processing licence and a pending provincial sales licence. The Valens Company anticipates the LYF edibles manufacturing facility will be used for both existing licensed producer and brand partners, as well as other consumer packaged goods companies who have been observing the space and awaiting an attractive entry point, and for the further development of Valens-owned IP for use in North America and emerging markets.
  • Further diversified platform equipped to produce expectedly higher margin edible products for the Cannabis 2.0 and 3.0 markets, including those leveraging SōRSE by Valens emulsion technology. The integrated platform also contains additional R&D, testing and distribution capabilities, with multiple manufacturing lines capable of producing various new product formats such as real fruit gummies, caramel filled bars, peanut butter cups, hard candies, granola products, and other customized baked goods. These precisely dosed edibles products are highly customizable, with vegan, sugar-free, low-sugar and natural ingredient offerings.
  • Complementary and high-value partnership network with existing definitive supply agreements and a robust pipeline of near-term executable opportunities with licensed producers, brand houses and white label customers, some of which are already part of Valens’ ecosystem, as well as strong relationships with third-party operators and retailers.

Transaction Details

The purchase price payable on closing is CDN$24.9 million, including the assumption of CDN$2.9 million in mortgage related debt and the issuance of up CDN$22.0 million in common shares of the Company, of which up to CDN$5.0 million is payable in cash and the remainder payable in common shares of the Company (the “Common Shares”) (being up to 9,846,154 Common Shares issued based on Valens’ 20-day VWAP of CDN$2.23 as of January 22, 2021). CDN$2.2 million in value of Common Shares (being 984,615 Common Shares) will be placed into escrow for indemnity purposes. In addition, CDN$2.9 million in value of Common Shares (being 1,282,051 Common Shares) of further consideration will be placed into escrow and is subject to release upon the achievement of certain Milestones relating to financial performance with other Milestones to be payable upon achievement in cash and/or Common Shares, at the Company’s option.

The LYF Acquisition remains subject to approval from the Toronto Stock Exchange and customary conditions and approvals from senior lenders. The Common Shares issued in connection with the LYF Acquisition will be subject to lock-up restrictions of four months and eight months for certain vendors and up to two years for the founders and majority share owners. There are no finders’ fees payable by the Company in connection with the LYF Acquisition. The vendors are each arm’s length parties to the Company. This transaction has been approved by the Company’s Board of Directors and is expected to close on or about February 18, 2021.


McCarthy Tétrault LLP acted as legal counsel to The Valens Company on the LYF acquisition and Aird & Berlis LLP acted as legal counsel to LYF.