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Canadian Licensed Producer Zenabis to Merge with Publicly Traded Bevo Agro
October 5, 2018 at 6:36 am
Published by NCV Newswire

Sun Pharm and Bevo Agro to Merge as Zenabis
Combined entity will have 3.5 million square feet of available space to produce cannabis for domestic and international markets

Vancouver, British Columbia – October 4, 2018 – Bevo Agro Inc. (TSXV: BVO) is pleased to announce that it has signed an Arrangement Agreement dated October 4, 2018 with Sun Pharm Investments Ltd. (“Sun Pharm”) for a reverse take-over of Bevo (the “Transaction”).

The Transaction

The Transaction involves three main elements:

the amalgamation of Sun Pharm with a wholly-owned subsidiary of Bevo (the “Reverse Take-Over”), with Sun Pharm shareholders receiving Bevo shares representing 86% of the outstanding Bevo shares (the expected exchange ratio being one Bevo share for each Sun Pharm share) and the existing Bevo shareholders continuing to hold Bevo shares representing a 14% interest in Bevo.
a plan of arrangement under which Bevo will distribute its interest in CubicFarm Systems Corp. (“Cubic”) to the shareholders of Bevo (the “Spin-Out”), with Bevo shareholders expected to receive one common share of Cubic for every Bevo share held. A brief summary of Cubic’s cubic farming business is set out below.
Bevo changing its name to Zenabis Global Inc. (“Zenabis,” being one of Sun Pharm’s established brands in the cannabis industry).
Bevo shareholders will not be granted dissent rights under the plan of arrangement. Instead, Bevo shareholders that do not wish to participate in Zenabis will have the right to exchange their Bevo shares for non-voting preferred shares of Zenabis which mature on the first anniversary of issuance, and are redeemable at any time at Zenabis’ option, in each case at a price of $2.70 per share. The preferred shares are convertible back into Zenabis common shares on the basis of 0.81 of a Zenabis Common Share (representing a price of approximately $3.33 per Zenabis common share) for each preferred share.
The Transaction was unanimously approved by the board of directors of Bevo. Shareholders holding approximately 58% of Bevo’s common shares have entered into voting agreements committing to vote their Bevo common shares in favour of the Transaction.

Zenabis

At the closing of the Transaction, Bevo’s shareholders will hold shares of one of the world’s largest cannabis companies.

Sun Pharm is currently a privately-held cannabis company which has one of the largest, federally licensed indoor medical cultivation footprints in Canada, operating two licensed production facilities in British Columbia and New Brunswick, with a third expected to be coming online shortly in Nova Scotia. These facilities encompass 660,000 square feet of indoor pharmaceutical grade cannabis production space, strategically positioned on Canada’s coasts, facilitating national distribution and access to international markets. Sun Pharm has received purchase agreements for recreational cannabis from each of the British Columbia Liquor Distribution Branch, New Brunswick Liquor Corporation, Nova Scotia Liquor Corporation, and Yukon Liquor Corporation.

Following the completion of the Transaction, Bevo’s greenhouse facilities in Langley are intended to be expanded and retrofitted to integrate advanced propagation technologies and state-of-the-art lighting and ventilation systems. On completion of the expected expansion of these greenhouse facilities, Zenabis will have 660,000 square feet of indoor space and 2.8 million¹ square feet of state-of-the-art greenhouse space in three provinces – British Columbia, New Brunswick and Nova Scotia.

Committed Financings

In connection with the Transaction, Sun Pharm has secured committed or funded financing of ~$57 million, in addition to $72 million secured since the company’s founding. The $57 million financing consists of three components:

$27.5 million of subordinated financing by way of convertible notes. This financing may be converted into shares of Zenabis at a price equal to the lower of $2.62 and a 20% discount to a financing expected to be completed concurrent with completion of the Transactions (the “Concurrent Financing”). The exchange ratio used for the Reverse Take-Over is being calculated on the basis that these convertible notes are converted and form part of 86% of Zenabis that is allocated to the shareholders of Sun Pharm;
$25 million of convertible senior debt financing that can be drawn on an as-needed basis by Zenabis. This financing may also be converted into shares of Zenabis at a price equal to a 20% discount to the Concurrent Financing, but this conversion is not considered in calculating the exchange ratio; and,
$4 million of common shares in Sun Pharm issued at a price of $2.82 per share.

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https://www.newcannabisventures.com/canadian-licensed-producer-zenabis-to-merge-with-publicly-traded-bevo-agro/