– Acquisition Expected to be Immediately
Accretive to Net Income –
VANCOUVER, BC, Aug. 16, 2021 /PRNewswire/ - Village
Farms International, Inc. ("Village Farms" or the "Company")
(NASDAQ: VFF) (TSX: VFF) today announced that it has acquired 100%
interest of privately-held, Colorado-based CBD-platform Balanced Health
Botanicals ("Balanced Health") in a transaction valued at
US$75 million, effective today
("Closing Date"). Balanced Health owns and operates one of
the largest brands in the hemp-derived cannabidiol (CBD) market in
the United States, providing
Village Farms with immediate entry into the US CBD market in a
consumer products category adjacent to the high-THC cannabis
market, as well as the broader consumer packaged goods (CPG)
wellness arena. Balanced Health is a profitable business and
the acquisition is expected to be immediately accretive to net
income.
Balanced Health develops and sells high-quality, CBD-based
health and wellness products. With an overriding focus on quality
and compliance, Balanced Health has established a diverse portfolio
of CBD and other cannabinoid products, including ingestible, edible
and topical applications that are distributed via e-commerce and
brick and mortar retail channels. Its e-commerce platform,
CBDistillery™ (www.theCBDistillery.com), is a top-five US CBD
brand1 and top-ranked web site within the CBD category,
with more than 30,000 orders monthly and a significant repeat
customer base. Through its long-term partnerships, Balanced
Health has control of the entire supply chain from seed-to-shelf,
seamless sourcing, manufacturing, and sale of high-quality end
products across a wide variety of forms and uses.
Highlights of the Acquisition
- Provides immediate access to the US retail CBD market,
estimated to grow to US$16 billion by
20252 (from US$4.7 billion
in 20202) through a well-established, profitable
business, with top brand awareness, an established e-commerce
platform (CBDistillery™), established retail channels and a growing
customer base;
- Adds an experienced team and product categories in the US
adjacent to Village Farms' consumer products portfolio with
expansion potential across all cannabinoid products as permissible
under currently evolving legislation, including an additional
potential pathway to the US high-THC cannabis market;
- Immediately accretive to net income with a purchase price of
US$75 million satisfied through
US$30 million in cash and common
shares of the Company equal to US$45
million to the sellers of Balanced Health;
- Expected to contribute annualized sales of more than
US$30 million at an annualized
adjusted EBITDA margin of in excess of 15% in 2022; and,
- Opportunity for Village Farms (and its wholly owned subsidiary,
Pure Sunfarms, Canada's premiere
supplier and brand) to add significant expertise throughout
Balanced Health's supply chain, including the potential to leverage
Village Farms' long-standing relationships as a produce supplier to
its grocery and large-format retailers in the US, as well as
through further investment in Balanced Health's brand and expansion
of its leading e-commerce platform.
Village Farms Management Commentary
"Since US federal legalization in late 2018, hemp-derived CBD
products, as well as other cannabidiol-based products, have been
part of our comprehensive strategy focused on high-value,
high-growth plant-based consumer packaged goods opportunities in
cannabis," said Michael DeGiglio,
CEO, Village Farms International. "As a well-established,
profitable leader in the US retail CBD market, Balanced Health is
the right opportunity, at the right time, to take our next major
step forward in anticipation of regulatory clarity that will propel
the growth of this nascent market. Balanced Health provides a
prudent means by which to invest in our cannabis strategy,
providing immediate accretion to profitability, meaningful upside
potential within the current Balanced Health business and multiple
additional strategic opportunities to drive significant additional
shareholder value over the medium and long term."
"Importantly, the addition of the Balanced Health platform
provides us with another potential pathway to participate in the US
high-THC cannabis market, when permitted to do so, that could
enable us to more rapidly access the market, in advance of our
plans to convert our more than 5.5 million square feet of high-tech
greenhouse facilities in West
Texas – one of the most favourable environments for cannabis
cultivation in the continental US – for large-scale, low-cost
production of cannabis."
Mr. DeGiglio concluded, "We are thrilled to welcome the
outstanding leadership and operational teams at Balanced Health to
the Village Farms family. They add complementary capabilities and
cannabis expertise that will significantly strengthen our ability
to achieve our strategic objectives. We look forward to leveraging
their unparalleled know-how and unique skill sets as we continue to
grow our Company and pursue our long-term vision to be a
formidable, vertically integrated consumer packaged goods company
focused on plant-based health and wellness."
Balanced Health Management Commentary
"We are ecstatic to join forces with Village Farms, a leader in
the global cannabis and CBD industries," said Chase Terwilliger, Chief Executive Officer of
Balanced Health Botanicals. "Since 2016, our nimble team has worked
tirelessly to create not only a leading brand of which we are
extremely proud but also one that is truly making an impact in the
lives of consumers by providing everyday premium products.
We've been able to achieve and maintain a top-five market
share1 in the CBD market, while generating positive
cash flow. As part of the Village Farms organization, we will be
able to take the next steps in our growth strategy, with the
opportunity for prudent, return-focused investments, to further
expand our market share and drive efficiencies, with a focus on
continued profitability."
"Village Farms is a highly complementary match for Balanced
Health, with a strong alignment of vision and values, providing the
opportunity for unparalleled collaboration, and a shared objective
to be the leader in every market in which we participate. We
remain steadfast in our commitment to our retail partners and
customers, and are confident this acquisition will further
strengthen our ability to meet their needs."
Acquisition Agreement and Purchase Price
Under the terms of the Acquisition Agreement, the consideration
to the sellers of Balanced Health is composed of US$30 million paid in cash, net of all debt of
Balanced Health and transaction expenses, and 4,707,113 common
shares of the Company, which are equal to US$45 million as calculated based on the volume
weighted average trading price on Nasdaq for the ten (10) trading
days ending the day prior to the Closing Date. The common shares
issued pursuant to the Acquisition Agreement will be subject to
lock-up agreements which allow for immediate trading, subject to
compliance with applicable securities laws, of 25% of shares
received and the balance to be released for trading in three (3)
equal installments of 25% every four (4) months. Balanced
Health will have no debt upon completion of the transaction.
Within 75 days of the Closing Date, the Company is required to
file with the U.S. Securities and Exchange Commission, on Form
8-K/A, historical financial statements for Balanced Health,
together with unaudited pro forma combined financial statements of
the Company as if the acquisition of Balanced Health had occurred
on January 1, 2021.
Advisors
Vicente Sederberg LLP and Torys LLP acted as legal counsel to
Village Farms and Orient Point Partners LLC acted as financial
advisor to Village Farms for this transaction.
Notes
1. Brightfield Group: 2021 Mid-Year US CBD Report.
2. Brightfield Group.
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.
In Canada, the Company's
wholly-owned Canadian subsidiary, Pure Sunfarms, is one of the
single largest cannabis operations in the world, the lowest-cost
greenhouse producer and one of the best-selling brands.
In the US, wholly-owned Balanced Health Botanicals is one of the
leading CBD brands and e-commerce platforms in the country.
Subject to compliance with all applicable US federal and state laws
and stock exchange rules, Village Farms plans to enter the US
high-THC cannabis market via multiple strategies, leveraging one of
the largest greenhouse operations in the country (more than 5.5
million square feet in West
Texas), as well as the operational and product expertise
gained through Pure Sunfarms' cannabis success in Canada.
Internationally, Village Farms is targeting selected, nascent,
legal cannabis and CBD opportunities with significant medium- and
long-term potential, with an initial focus on the Asia-Pacific region and Europe.
Cautionary Statement Regarding Forward-Looking
Information
This press
release contains forward-looking
statements within the meaning of the United States Private
Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended,
(the "Securities Act") and Section 21E of
the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and is subject to
the safe harbor created by those sections. This press release
also contains "forward-looking
information" within the meaning of applicable
Canadian securities law. We refer to such forward-looking
statements and forward-looking information collectively
as "forward-looking
statements".
Forward-looking statements in
this press release relate to
the Company's and Balanced Health future outlook or financial
position and anticipated events or results and may include
statements regarding the financial position, income, business
strategy, budgets, expansion plans, litigation, projected
production, expectations regarding the US retail
CBD and high-THC cannabis markets, the effect that the acquisition
of Balanced Health will have of the
Company's net income, sales and EBITDA
margin, projected costs, capital
expenditures, financial results, profitability, taxes, plans and
objectives of or involving the Company and Balanced
Health.
Particularly, statements regarding future results,
performance, achievements, prospects or opportunities for the
Company or Balanced Health, the greenhouse vegetable industry and
the cannabis industry and market are forward-looking statements. In
some cases, forward-looking information can be identified by such
terms as "outlook", "may", "might", "will", "could", "should",
"would", "occur", "expect", "plan", "anticipate", "believe",
"intend", "try", "estimate", "predict", "potential", "continue",
"likely", "schedule", "objectives", or the negative or grammatical
variation thereof or other similar expressions concerning matters
that are not historical facts. The forward-looking statements in
this press release are subject to risks that may include, but are
not limited to: our operating history, including that of Balanced
Health, Pure Sunfarms and our start-up operations of growing hemp
in the United States; the legal
status of Pure Sunfarms and Balanced Health cannabis business;
risks relating to the integration of Balanced Health into our
business; risks relating to obtaining additional financing,
including our dependence upon credit facilities; potential
difficulties in achieving and/or maintaining profitability;
variability of product pricing; risks inherent in the cannabis,
hemp, CBD, cannabinoids, and agricultural businesses; market
position, ability to leverage current business relationships for
future business involving hemp and cannabinoids, the ability of
Pure Sunfarms to cultivate and distribute cannabis in Canada; existing and new governmental
regulations, including risks related to regulatory compliance
and regarding obtaining and maintaining licenses required under
the Cannabis Act (Canada), the
Criminal Code and other Acts, S.C. 2018, c. 16 (Canada) for its Canadian operational
facilities), and changes in our regulatory requirements; legal and
operational risks relating to expected conversion of our
greenhouses to cannabis production in Canada and in the USA; risks related to rules and regulations at
the US federal (Food and Drug Administration and United States
Department of Agriculture), state and municipal levels with respect
to produce and hemp, cannabidiol-based products commercialization;
retail consolidation, technological advances and other forms of
competition; transportation disruptions; product liability and
other potential litigation; retention of key executives; labor
issues; uninsured and underinsured losses; vulnerability to rising
energy costs; environmental, health and safety risks, foreign
exchange exposure, risks associated with cross-border trade;
difficulties in managing our growth; restrictive covenants under
our credit facilities; natural catastrophes; the ongoing and
developing COVID-19 pandemic; and tax risks.
The Company has based these forward-looking statements on
factors and assumptions about future events and financial trends
that it believes may affect its financial condition, results of
operations, business strategy and financial needs. Although the
forward-looking statements contained in this press release are
based upon assumptions that management believes are reasonable
based on information currently available to management, there can
be no assurance that actual results will be consistent with these
forward-looking statements. Forward-looking statements necessarily
involve known and unknown risks and uncertainties, many of which
are beyond the Company's control, that may cause the Company's or
the industry's actual results, performance, achievements, prospects
and opportunities in future periods to differ materially from those
expressed or implied by such forward-looking statements. These
risks and uncertainties include, among other things, the factors
contained in the Company's filings with securities regulators,
including this press release. In particular, we caution you that
our forward-looking statements are subject to the ongoing and
developing circumstances related to the COVID-19 pandemic, which
may have a material adverse effect on our business, operations and
future financial results.
When relying on forward-looking statements to make decisions,
the Company cautions readers not to place undue reliance on these
statements, as forward-looking statements involve significant risks
and uncertainties and should not be read as guarantees of future
results, performance,
achievements, prospects and
opportunities. The forward-looking statements made in this press
release relate only to events or information as of the date on
which the statements are made in this press release. Except as
required by law, the Company undertakes no obligation to update or
revise publicly any forward-looking statements,
whether as a result of new
information, future events or otherwise, after the date on
which the statements are made or to reflect the occurrence of
unanticipated events.
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SOURCE Village Farms International, Inc.