Aleafia Acquires Emblem Corp. in Major Canadian All-Stock Deal
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Aleafia Acquires Emblem Corp. in Major Canadian All-Stock Deal

The acquisition will have an immediate impact on the early growth of the Canadian adult-use market.

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December 19, 2018

As Canada’s adult-use market nabs international headlines, the backdrop continues to be one of ongoing consolidation across the country’s 126 licensed cultivation businesses. Aleafia, a vertically integrated Canadian medical cannabis company, announced Dec. 19 that it will acquire Emblem Corp., itself a vertically integrated Canadian medical cannabis company, for a 27-percent premium. 

The $173-million all-stock deal creates a major medical cannabis producer with access to a combined 60,000 patients across 40 clinics. Through Aleafia’s Canabo Medical Clinic network and Emblem’s education-focused GrowWise Health, the patient base gives the newly constituted company (which will operate under the Aleafia name) increased capacity for growth.

In more specific terms: Emblem shareholders will receive 0.8377 of an Aleafia common share in exchange for each Emblem common share, according to the press release announcing deal. Emblem CEO Nick Dean said that he expects those Aleafia shares to appreciate in the new year. All told, Aleafia shareholders will control a 59-percent stake in the combined company; Emblem shareholders, following the deal, will control 41 percent.

Aleafia CEO Geoffrey Benic said the deal represents a “tremendous opportunity” for Canadian patients during a Dec. 19 appearance on Midas Letter. “You’ve got to look for great assets that can transform your business—and they’re complementary to what you’re doing—and you consolidate,” Dean said. 

In describing the deal, he spoke about ongoing supply constrains in Canada. Aleafia will take on more of the classic licensed producer role, by leveraging Emblem’s extraction capacity and product innovation and providing greater access to its Canabo Medical Clinic patient base. Aleafia has the existing patients; Emblem has the existing production capacity, Dean said.

In September 2018, Emblem signed a supply agreement with Aphria, which will work into Aleafia’s planned annual capacity of approximately 138,000 kg after this latest deal.

“The Emblem acquisition rapidly accelerates the execution of Aleafia’s strategy to become a vertically integrated, diversified cannabis company. It is difficult to overstate the significance of securing the highest quality medicine for our patients and Aleafia,” Benic said in a public statement. “Emblem’s product leadership in the medical and adult-use sectors and highly coveted supply agreements will perfectly complement Aleafia’s cannabis production and clinic operations.”

And the deal doesn’t stop at the Canadian border.

According to the press release: “Through Emblem’s joint venture with German pharmaceutical wholesaler Acnos Pharma GmbH, Aleafia expects to access the world’s largest medical cannabis market serving more than 82 million people, with access to approximately 20,000 pharmacies, along with access to Australia’s burgeoning medical cannabis market upon completion of Aleafia’s previously announced transaction with CannaPacific Pty Ltd.”