A potential lifeline thrown to embattled Aleafia Health Inc. (TSX: AH)(OTCQB: ALEAF) in the form of an acquisition by U.S.-based Red White & Bloom Brands Inc. (CSE: RWB)(OTC: RWBYF) was torpedoed by some of Aleafia’s own shareholders, the two companies announced Friday afternoon.
Under the terms of the acquisition deal, a particular convertible debt settlement of $6 million was subject to Aleafia shareholder approval, and more than a third of them “have communicated to Aleafia and RWB that they will not accept the terms of the proposed settlement.”
Because of that rejection, the companies said in a release, the deal “cannot be satisfied and the parties have mutually agreed to terminate” the acquisition.
Aleafia has been hemorrhaging cash and as of its latest fiscal quarter was listed as a going concern, with a cumulative deficit of more than $500 million and a net loss of $34 million for its latest fiscal year, which ended March 31.
The acquisition by RWB – announced just over a month ago – would have reportedly saved the combined businesses $10 million a year, and built the new entity’s revenue profile by 41%. RWB would have owned 76% of the new company, while Aleafia shareholders would have received 24%.
The termination of the deal is at no cost to either party, according to the release.
“Disinterested members of the board of directors of Aleafia continue to explore and evaluate potential strategic alternatives that may be available to Aleafia with the goal of maximizing value for Aleafia stakeholders,” the mutual press release stated.