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CBi(2) Capital and 51st Parallel announce the creation of LivWell International and a strategic equity investment in GCH, Inc., securing the exclusive Canadian licensing rights to WILLIE'S RESERVE(TM)
TSXV - TSX Venture Exchange · Canada
CBi(2) Capital and 51st Parallel announce the creation of LivWell International and a strategic equity investment in GCH, Inc., securing the exclusive Canadian licensing rights to WILLIE'S RESERVE™
Canada NewsWire
CALGARY, July 23, 2018
/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES./
CALGARY, July 23, 2018/CNW/ - Target Capital Inc. d.b.a. CBi2 Capital ("CBi2") (TSXV/CSE: TCI) and 51st Parallel Inc. ("51st Parallel") are pleased to announce a series of transformational transactionsthat will ultimately result in the creation of LivWell International Corp. ("LivWell International") through a business combination involving CBi2and 51st Parallel. LivWell International will be a CSE and TSXV-listed, Calgary-based, vertically integrated cannabis company focused on cultivation, processing and extraction, retail operations, and the execution of an aggressive cannabis-brand acquisition, licensing and development strategy.
Concurrent with the creation of LivWell International, the following transactions are expected to be completed:
| (i) | a strategic US$20.0 million equity investment by 51st Parallel in GCH, Inc. ("GCH") a Denver-based cannabis brand holding company; | | (ii) | the acquisition by 51st Parallel of the exclusive Canadian licensing rights to GCH's flagship brands, WILLIE'S RESERVETMand WILLIE'S REMEDYTM, along with the first option to GCH's future brand portfolio for no additional consideration other than as already contemplated by the agreements between GCH and 51st Parallel (the "GCH Transaction"); and | | (iii) | a concurrent $50.0 million subscription receipt financing in 51st Parallel. |
LivWell International will be led by the existing management team of LivWell Enlightened Health™ ("LivWell"): John Lord(Chairman and CEO), Dean Heizer(Executive Director), Michael Lord(Chief Operating Officer), Todd Oltmans(Manager of Construction and Facilities), Nate Fate(Manager of Cultivation and Production) and Dakeana Jones (Manager of Human Resources). Joining LivWell's team will be David Cheadleas LivWell International's VP Finance and Chief Financial Officer and Sony Gill as Corporate Secretary. Upon completion of the business combination involving CBi2and 51st Parallel, LivWell International's board of directors will be comprised of the following professionals: John Lord, Dean Heizer, Andy Williams(Co-founder and Chairman of Medicine Man Technologies Inc.), Jason Kujath(Co-founder and President of 51st Parallel) and Ron Hozjan(VP Finance and CFO of Tamarack Valley Energy Ltd.).
In connection with the GCH Transaction, Sonny Mottahed, Chairman, President and CEO of CBi2and CEO and a director of 51st Parallel, will join the board of directors of GCH.
Key Attributes of LivWell International:
one of the industry's most complete and highly accomplished cannabis teams with over ten years of operating experience from _seed-to-sale_including cultivation, extraction, edibles production, vaporizer production, branding, retail operations and extensive R&D; exclusive and perpetual Canadian licensing rights to LivWell's extensive portfolio of existing and future intellectual property ("IP"), patents, standard operating procedures ("SOPs"), proprietary tissue culture program, extraction technologies, and a library of over 175 extracted and infused products and trademarks, which include Infusiasm™, #Hash™, 5 Leaf™ and Faded™; direct equity ownership in GCH, the owner of the WILLIE'S RESERVETMbrand, one of the industry's most recognizable brands; exclusive and perpetual Canadian licensing rights to GCH's existing brands, including WILLIE'S RESERVETMand its recently launched, CBD-focused WILLIE'S REMEDYTMbrand, and a first option on all future GCH brands for no additional consideration other than as already contemplated by the agreements between GCH and 51st Parallel; aggressive brand acquisition and licensing strategy and expanded retail footprint; and fully-funded business plan with expected annual cultivation capacity of ~32,000 kg of dried flower and annual extraction capacity of ~10,000 kg, as well as a broad retail footprint consisting of eight applied-for locations throughout Albertaand two high profile locations identified in British Columbia.
Strategic Rationale for the Plan of Arrangement and Related Transactions
Management and the board of directors of each of CBi2and 51st Parallel believe their respective shareholders will benefit from the following attributes of the Transaction (as defined below):
a platform to leverage LivWell's successful operating experience in Coloradoand apply it to the Canadian and international markets; access to a best-in-class operating team that currently oversees over 180,000 ft2of cannabis facilities, 15 retail stores and over 500 employees; the potential to create significant shareholder value through the combination of 51st Parallel's existing cultivation and retail assets with one of the industry's most recognized brands in Willie's Reserve™ and the proven leadership team of LivWell; and the ability to quickly build operational scale and develop, license and/or acquire additional brands.
Sonny Mottahed, Chairman, President and CEO of CBi2and CEO and a director of 51st Parallel, said: "This is a highly transformative transaction for our company and our shareholders. The LivWell team is recognized as the most accomplished operator in the global cannabis industry, bringing the experience and knowledge needed to position LivWell International to compete with other industry leaders. The investment into GCH, the owner of Willie's ReserveTM, represents the beginning of a broader brand strategy to augment our existing retail and distribution plans. In the coming years, we expect the cannabis industry to function in a manner consistent with the consumer packaged goods space in which premier brands will be positioned to dominate consumer market spend."
John Lord, Chairman and CEO of LivWell, said: "We are excited about this transaction with CBi2and 51st Parallel. The upcoming federal legalization of the Canadian cannabis market provides a unique opportunity to leverage our ten years of operational expertise and expand the full suite of LivWell brands across Canadaand internationally. We look forward to creating a successful, high-growth business and delivering value for both our customers and shareholders."
Plan of Arrangement and Related Transactions Summary
Formation of LivWell International
CBi2and 51st Parallel have executed an arrangement agreement dated as of July 23, 2018(the "Arrangement Agreement") whereby CBi2and 51st Parallel will complete a business combination pursuant to a plan of arrangement (the "Plan of Arrangement") under the _Business Corporations Act_(Alberta) (the "Transaction"). The Transaction is not a related party transaction.
Pursuant to the Transaction, each common share of 51st Parallel ("51st Parallel Share") will be exchanged for common shares of CBi2("CBi2Shares") on the basis of a deemed value of $0.11per CBi2Share and CBi2and 51st Parallel will be amalgamated to form LivWell International. The Transaction is expected to constitute a "Reverse Takeover" pursuant to the policies of the TSX Venture Exchange (the "TSXV") and the Canadian Securities Exchange (the "CSE") and is subject to the acceptance of the TSXV, the CSE and shareholders of CBi2and 51st Parallel. CBi2is not at arms' length to 51st Parallel.
Strategic Equity Investment in GCH
In addition, 51st Parallel is pleased to announce the execution of an investment agreement (the "Investment Agreement") with GCH, a cannabis brand holding company founded with Willie Nelsonto develop a portfolio of cannabis brands to meet the wide range of consumer preferences. Pursuant to the Investment Agreement, 51st Parallel will invest US$20.0 millioninto GCH and will own approximately 12.4% of GCH on a fully diluted basis.
At closing of the Transaction, 51st Parallel and GCH will enter into: (i) an investor rights agreement pursuant to which, among other things, LivWell International will have the right to nominate a director to the board of GCH, who will initially be Sonny Mottahed; and (ii) an exclusive use agreement pursuant to which, among other things, LivWell International will have exclusive and perpetual rights to all existing brands and products of GCH in Canada, including WILLIE'S RESERVETMand WILLIE'S REMEDYTM, and a first option on all further brands and products of GCH for no additional consideration other than as already contemplated by the agreements between GCH and 51st Parallel. GCH is at arms' length to 51st Parallel, CBi2and LivWell.
WILLIE'S RESERVE™ is a line of cannabis products inspired by American music legend and long-time marijuana advocate Willie Nelson. Launched in 2016, WILLIE'S RESERVE™ is available in Colorado, Washington, Nevada, Oregonand California. Operating under the simple philosophy of "my stash is your stash," WILLIE'S RESERVE™ maintains the highest quality through partnerships with licensed producers to create a variety of strains, signature Ready Rolls, concentrates and edibles. GCH has also recently launched its flagship CBD product line, WILLIE'S REMEDYTM, that provides customers with numerous non-psychoactive benefits of cannabis. GCH owns the exclusive rights, and in perpetuity, to the use of Willie Nelson'sbrand for the cannabis industry.
Sonny Mottahed, GCH Board Nominee (Calgary, Alberta, Canada) Sonny is the co-founder, Chief Executive Officer and a director of 51st Parallel and the Chairman, President and CEO of CBi2. Sonny brings significant senior leadership and financial expertise to the Canadian cannabis market. Sonny is currently the Chief Executive Officer and Managing Partner of Black Spruce Merchant Capital, a corporate finance advisory firm based in Calgary. Prior thereto, he was the Managing Director, Investment Banking at Raymond James Ltd. in Calgarywhere he was instrumental in raising $4.0 billionin capital over 4 years.
Exclusive License with LivWell
In addition, 51st Parallel is pleased to announce a license with LivWell which will provide LivWell International with exclusive access to, and the perpetual right to use, LivWell's existing and future IP, patents, trademarks, proprietary tissue culture program, extraction technologies, library of extracted and infused products and SOPs in Canada.
51stParallel Subscription Receipt Financing
In conjunction with the closing of the Transaction, 51st Parallel has entered into an agreement with a syndicate of investment dealers (the "Agents") led by Eight Capital and including Cormark Securities Inc., Canaccord Genuity Corp., AltaCorp Capital Inc. and Atlas Capital (which are each a "member" within the meaning of the policies of the TSXV, other than Atlas Capital), for a brokered private placement offering of subscription receipts of 51stParallel (the "InitialSubscription Receipts") at an issue price (the "Issue Price") to be determined in the context of the market on a best efforts agency basis for aggregate gross proceeds of up to $50.0 million(the "Financing"). The Financing is expected to close on or about August 21, 2018. Each Initial Subscription Receipt will be exchangeable into one 51st Parallel Share without any further action required on the part of the holder of the Initial Subscription Receipt and without payment of any additional consideration, upon the closing of the Transaction. The terms of the Financing are outlined below under the heading "_Brokered Subscription Receipt Financing_".
LivWell International Highlights
Corporate Strategy
Following completion of the Transaction, and upon receipt of the requisite licenses to produce and distribute cannabis, LivWell International will be a CSE and TSXV-listed, Calgary-based, vertically integrated cannabis company focused on cultivation, processing and extraction, and retail operations supported by executing on an aggressive cannabis brand acquisition, licensing and development strategy.
The following table provides an overview of LivWell International's strategy:
| | | | Brands | Build a portfolio of iconic brands both organically and through acquisitions in order to target specific consumer demographics and user preferences | | Retail | 8 retail licenses submitted in Alberta with an additional 4 in development with the potential to increase to 50+ and expand into other jurisdictions | | Cultivation | LP applicant with 12,200 kg/year of initial production capacity on-stream with expansion potential of 32,000 kg/year | | Extraction | Phase I 13,000 ft2extraction facility with monthly processing capacity of 500 kg of feedstock, with potential to expand to 800 kg | | R&D | Future initiative upon receiving a license |
The Transaction is expected to ignite an aggressive expansion strategy for LivWell International with the company focused on the following key growth initiatives:
increase the retail footprint in targeted jurisdictions across Canada; build a portfolio of iconic brands both organically and through acquisitions; maintain top-tier industry KPIs that are consistent with LivWell's historical performance; focus on continuous product innovation including extraction and refined products; complete strategic acquisitions over the entire cannabis vertical; evaluate the potential of expanding operations globally into key jurisdictions; commit to creating a culture that is focused on the customer's experience and value; and devote significant resources to continued employee education.
Information with respect to LivWell International's work program and assets will be included in the management information circular to be filed on SEDAR in connection with the Transaction at www.sedar.com.
Background on LivWell
LivWell International's management team has extensive cannabis experience given its track record of running and growing LivWell. Based in Denver, Colorado, and beginning as a single medical dispensary in 2009, LivWell is a fully vertically-integrated cannabis producer, refiner and retailer. LivWell is one of Colorado'slargest retail chains, operates a highly specialized 180,000 ft2cannabis production facility and a satellite 30,000 ft2 R&D facility and currently employs over 500 people in its cultivation, production and retail operations. LivWell also operates 14 retail locations in Coloradoand a retail dispensary in Oregonand is in the process of constructing a 192,000 ft2production and extraction facility in Michigan.
LivWell provides its patients and customers with the best value, quality and variety of cannabis products including flower, concentrates, topicals, edibles, accessories and more. Using a team of innovative farmers and scientists, LivWell grows more than 40 strains of cannabis to meet the evolving tastes of its customers and is constantly developing new strains for commercial production. It has developed a significant portfolio of IP, trademarks, patent applications and SOPs spanning the entire cannabis vertical, complete from _seed-to-sale_including:
proprietary tissue culture program, spectrums of LED light, nutrient recipes, cure processes, and automated manufacturing and packaging systems; proprietary extraction technologies including terpenes reclamation and re-introduction as well as cannabinoid separation; library of over 175 proprietary extracted and infused products; detailed SOPs and operating procedures covering every aspect of cultivation, extraction, retail, security and compliance; numerous trademarks on branded consumer products including Infusiasm™ for infused products, #Hash™ for concentrates, 5 Leaf™ for topicals and Faded™ for branded merchandise and accessories; proprietary training platform called LivWell University™; turnkey retail platform with an integrated point of sale and inventory management system; and over ten years' worth of data and insight on consumer behavioural trends and purchase habits.
LivWell has been consistently ranked as one of the top producers, processors and retailers by Cannabis Business Executive and it has received numerous other industry awards and accolades. It carries a wide variety of products from leading brands throughout the industry, as well as a full selection of glass and accessories to meet all of its customers' cannabis needs. LivWell's goal is to be its customers' one-stop-shop for all things cannabis.
The Transaction does not include a business combination with LivWell, which will remain as a standalone entity subsequent to the Transaction.
LivWell International Management Team
Subject to, and following the closing of, the Transaction, the senior officers of LivWell International are expected to be the following individuals:
John Lord, Chairman and Chief Executive Officer (Denver, Colorado, USA) John is the CEO and sole shareholder of LivWell. John Lordis a successful entrepreneur who has founded, built and sold several consumer products companies. Prior to LivWell, John created a successful baby products company which sold products into major retailers, including Walmart. After selling the company in 2008 to Summer Infant (NASDAQ SUMR), John was drawn to the cannabis industry by the opportunity to apply his business acumen to a fledgling industry. John has positioned LivWell at the forefront of the industry, blending cannabis culture with solid business principles.
David Cheadle, VP Finance and Chief Financial Officer (Calgary, Alberta, Canada) David was previously the CFO and a founding shareholder of 51st Parallel and has over 10 years of investment banking experience. Prior to 51stParallel, David was a Managing Partner at a boutique M&A advisory firm as well as Vice President, Investment Banking at two other boutique investment banks. David is a CFA charterholder and holds a B. Comm. (Honours) in Finance from the University of Manitoba.
Michael Lord, Chief Operating Officer (Denver, Colorado, USA) Michael is currently Director of Business Development for LivWell where he focuses on acquisitions and developing new technologies and methodologies for the company. He is currently on the Advisory Board of 51st Parallel, and previously served on the advisory boards of Leafly.com and Leafbuyer.com. Michael has been actively involved in the production and retail operations of LivWell for over five years. He led the acquisition and design team for a number of LivWell's Coloradolocations and created the company's industry leading educational platform (LivWell University™) as well as an online sales training tool being deployed to LivWell's vendors (Learn Brands™). He graduated from the Monfort College of Business.
Sanjib (Sony) Gill, Corporate Secretary (Calgary, Alberta, Canada) Sony is a partner at McCarthy Tétrault LLP, a national law firm. Sony has dealt with all aspects of a public and private company's creation, growth, restructuring and value maximization. Sony has extensive experience in the negotiation, structuring and consummation of a broad range of corporate finance, securities and mergers and acquisitions. He serves on the board of directors of, and acts as corporate secretary to, numerous public and private companies. He was acknowledged as a Top 40 Under 40 by Lexpert.
LivWell International Board of Directors
Subject to, and following the closing of, the Transaction, the board of directors of LivWell International is expected to include John Lordand the following independent directors:
Dean Heizer, Executive Director (Denver, Colorado, USA) Dean is currently Executive Director and Chief Legal Strategist for LivWell. Dean began his career at Gorsuch Kirgis, LLP one of Denver'slargest law firms, where he spent 13 years before co-founding Heizer Paul LLP, in 2004. Dean has extensive government relations, regulatory and litigation experience representing Fortune 500 companies, governments, trade associations and some of Colorado'slargest foundations. Dean has represented the LivWell group of companies since inception and took an in-house role in January 2015.
Andy Williams, Director (Denver, Colorado, USA) Andy is the Co-Founder and Chairman of the Board of Medicine Man Technologies Inc. and CEO of Medicine Man in Colorado. Andy is a veteran of the US Army and served three years as a Cavalry Scout in the 3rd Infantry Division and went on to earn a Bachelor of Science degree in Industrial Engineering from the University of Southern Coloradoin Pueblo, CO.Andy has worked in a wide range of manufacturing industries as an industrial engineer, and in leadership positions.