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$230 million sale of Vancouver Island craft cannabis producer shocks local industry

By Anna Dimoff, CBC News Posted: Jan 18, 2018 2:19 PM PT| Last Updated: Jan 18, 2018 5:12 PM PT

'For someone like myself who is a small craft grower ... it's kind of jaw dropping that that's a possibility'

A massive deal for a Vancouver Island cannabis grower could be an indication of what's in store for the local craft cannabis industry.

This week, Ontario-based licensed marijuana producer Aphria Inc., which is based in Leamington, acquired Ladysmith cannabis grower Broken Coast in a deal worth about $230 million in cash and shares.

The sale itself wasn't much of a surprise but the amount the local grower was bought for was a shock, said Travis Lane, the director of B.C.'s Independent Cannabis Association.

"They were actually relatively small, so for them to get such a huge windfall as private owners is indicative of where the cannabis market is at."

"For someone like myself who is a small craft grower looking to get into the environment with these new regulations, it's kind of jaw dropping that that's a possibility," Lane told All Points West guest host Megan Thomas.

Broken Coast operates an indoor cannabis production facility on the Island, and, with this sale, Aphria will expand the project to increase the facility's annual capacity to 10,500 kilograms per year.

Consolidation on the rise

"I think it's going to be tough in the early going in the legalization era for people to compete with these large publicly capitalized companies," Lane said.

He predicts the trend of large companies swallowing up smaller producers across the country will be common for the early stages of growth in the market post-legalization.

Aphria's acquisition of Broken Coast is just the latest consolidation in the Canadian cannabis industry.

Last year, Edmonton licensed producer Aurora Cannabis Inc. launched a bid to take over Saskatoon's CanniMed Therapeutics Inc., which was in the process of acquiring Newstrike Resources Ltd.

Quality bud

But the desire for B.C. bud is growing and large licensed producers from out of province are closely eyeing the province's growers. Aphria is also merging B.C.'s DOJA Cannabis Company with Ontario-based Tokyo Smoke.

Lane said that the quality product that the province is so well known for is coming from illicit producers growing craft cannabis on a smaller scale but. as regulation is introduced, he hopes to see these talented unlicensed growers included in the industry's growth.

"Hopefully, the new set of regulations coming out with the micro licences will allow the amalgamation of the illicit side of the small craft producers, that are much smaller even than Broken Coast, to step into the system and provide their wares to the public," he said.

As for how those products are peddled, Lane said the ideal scenario would be to treat cannabis like craft beer and allow small producers to introduce their strains to retailers directly, rather than distributing products from a warehouse like the Liquor Distribution Branch.

To hear the full interview listen to media below:

http://www.cbc.ca/player/play/1140034627706/

Source: http://www.cbc.ca/news/canada/british-columbia/broken-coast-sale-aphira-1.4493713

- If you listen to the audio of the interview, you will notice the responses provided by Travis explain the ramifications of the valuation shock of this sale and how small cannabis LPs in Canada, like BLDV's clients, are getting the attention of buyers.