Village Farms International, Inc. (TSX: VFF)(NASDAQ:VFF) and Emerald Health Therapeutics (TSXV: EMH)(OTCQX: EMHTF) said that they have entered into a settlement agreement that will settle their prior disputes. The result is that Village Farms will own 53.5% of Pure Sunfarms (PSF) and Emerald will own 46.5% of Pure Sunfarms. Originally this was a 50/50 joint venture, but then the two companies had a falling out.
Last year, Emerald said it had contributed over $37.4 million in equity investment in the D3 & D2 greenhouse operations for the Pure Sunfarms joint venture. In addition, it provided $13 million in an interest-bearing loan and purchased over $20.5 million of cannabis as per the terms of its supply agreement with PSF. On November 1, 2019, Emerald notified PSF that it has decided to set-off the $5.94 million payment owed by Emerald to PSF against a portion of PSF’s debt under Emerald’s $13.0 million principal amount shareholder loan.
Village Farms then advanced $5.94 million to PSF for additional equity. Village Farms claims that it has the right to acquire these shares under the PSF shareholders’ agreement. At the time Riaz Bandali, President and CEO of Emerald said, “We were shocked to receive this notice. We can’t speculate on Village Farms’ motivation for making this irresponsible and inaccurate claim, but we want to reassure investors that there has been no change in ownership of PSF. We are disappointed at the aggressive approach of Village Farms in this matter; however, we continue to believe that cooler heads will prevail. Until then we will assertively defend our rights on behalf of our shareholders in the face of these unwarranted actions by Village Farms.”
Emerald’s $5.94 million equity contribution that it opted to not make is now canceled. It is waiving repayment of the $13 million loan and instead will issue a promissory note to Pure Sunfarms in the amount of C$952,237. Village Farms has made an additional equity contribution to Pure Sunfarms of C$8.0 million in 2020.
In addition, Emerald had the provision to purchase 40% of Pure Sunfarms’ aggregate production in 2018 and 2019 and they are now released from that. Pure Sunfarms and Emerald will release each other from their current supply agreement under which Emerald has the provision to purchase 25% of Pure Sunfarms’ aggregate cannabis production from the Delta facilities in 2020, 2021 and 2022.
Emerald will transfer 2.5% of additional equity in Pure Sunfarms to Village Farms. Village Farms is one of the largest and longest-operating vertically integrated greenhouse growers in North America and the only publicly traded greenhouse produce company in Canada. Village Farms produces and distributes fresh, premium-quality produce with consistency 365 days a year to national grocers in the U.S. and Canada from more than nine million square feet of Controlled Environment Agriculture (CEA) greenhouses in British Columbia and Texas, as well as from its partner greenhouses in British Columbia, Ontario, and Mexico. Sunfarms Corp. is one of the single largest cannabis growing operations in the world.