The Valens Company Inc. (TSX: VLNS) (OTCQX: VLNCF) entered into an agreement with ATB Capital Markets Inc. to purchase 17,080,000 units at a price of C$2.05 per Unit for gross proceeds of C$35,014,000. Then following that announcement, Valens said it was buying LYF Food Technologies Inc. in a cash and share transaction for C$24.9 million, plus up to an additional C$17.5 million in consideration upon the business achieving certain earn-out EBITDA milestones. Valens said in a statement that the LYF Acquisition is expected to be accretive in 2021, and if all of the Milestones are met, the transaction represents an approximate ~4.2x multiple on the last milestone achieved.
LYF is an edibles manufacturer based in Kelowna, British Columbia with expertise in novel product creation, white label manufacturing, and infusion technologies. Similar to Valens, LYF operates a product development and manufacturing platform focused on consumer-driven innovation, and product safety and consistency. LYF says it brings a proven team with significant experience producing high throughput food products, in addition to experience operating and working with major Canadian grocery chains, health and wellness retailers, and pharmacies. Just minutes away from Valens’ headquarters, LYF’s purpose-built manufacturing facility produces innovative edible products using the highest quality ingredients and cannabis extracts, offered in proprietary delivery methods.
Tyler Robson, Chief Executive Officer and Chair of the Board of The Valens Company said, “LYF has set the standard of what high quality edibles should be and has developed a diverse and flexible manufacturing platform to play a dominant role in the Canadian edibles market. LYF stood out for its product innovation and marketing teams, as well as its broad range of edible products which will introduce new formats to Canadian consumers that are typically only available in more mature markets. We look forward to further developing our product offering to reach more consumers with high-quality and unique cannabis edibles as this product segment continues to gain in popularity.”
These moves come right after the company said it made the strategic decision to liquidate the majority of its cannabis oil inventories at market-clearing prices in the fourth quarter of 2020. The stock was falling over 9% on the news to lately sell at $1.92. This company said that the decision will lead to a related one-time financial statement impact in the fourth quarter of 2020 between $9.0 million and $10.0 million, including a $2.9 million to $3.2 million loss from the sale of bulk cannabis oil, an inventory write-down of $4.7 million to $4.9 million, and a provision on previously entered biomass commitments of $1.4 million to $1.9 million.