After months of a continued dispute between the two owners of a cannabis producer in British Columbia (BC), the firms have finally settled on an agreement.
Pure Sunfarms is a Canadian licensed producer (LP) co-managed by Village Farms International (TSX:VFF,NASDAQ:VFF) and Emerald Health Therapeutics (TSXV:EMH,OTCQX:EMHTF). The two public firms entered into a disagreement over a pending invoice payment addressed to Emerald as part of a previously agreed deal between the joint venture (JV) and one of its parent companies.
On Monday (March 3), Emerald and Village Farms put an end to the dispute with a variety of agreements, including a transfer of ownership stake, which will lead to an increase in ownership of Pure Sunfarms by Village Farms. Now the ownership breakdown of Pure Sunfarms will be 57.4 percent and 42.6 percent for VFF and Emerald, respectively.
This rebalancing in the ownership stakes from both firms will settle an extension of the original disagreement since back in November, when Emerald disputed Village Farms telling shareholders it now holds a majority stake in the LP.
The two companies saw opposite reactions from the capital markets. While Emerald quickly rose following the start of the trading session, Village Farms noticed a loss in both New York and Toronto. As of 11:14: a.m. EST, Village Farms was down 5.29 percent in both exchanges, but Emerald hit a nearly 30 percent uptick, boosting its share price to C$0.24.
A total of 5.9 million shares of Pure Sunfarms, held in escrow due to the missing payment worth C$5.9 million from Emerald, will be canceled.
Emerald will also no longer be held responsible for the supply agreement for the purchase of 40 percent worth of Pure Sunfarms’ aggregate product.
In a statement, Emerald President and CEO Emerald Riaz Bandali said this new deal resolves all disputes present amid the partners and would allow the focus to be back on Pure Sunfarms’ operations.
Besides all the other resolutions included in the new settlement, Village Farms added a contribution worth C$8 million to its JV. The company will be able to also recognize sales worth C$8.1 million from Pure Sunfarms as part of its Q1 2020 period.
The new agreement between Village Farms and Emerald is set to close by Friday (March 6).
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.