Post-closing, Biome Grow will become MYM’s largest shareholder with a 19% stake in the company
Biome Grow Inc () () announced Monday it is selling its Highland Grow Inc subsidiary to MYM Nutraceuticals Inc (CSE:MYM) (OTCMKTS:MYMMF) in a C$12.9 million deal.
The deal consideration includes around 175.3 million common and special shares of MYM Nutraceuticals, making Biome Grow the cannabis producer’s largest shareholder with a 19% stake in the company.
In a statement, Biome Grow’s CEO Khurram Malik told investors that the sale – and resulting ownership of MYM shares – was a “great opportunity” to benefit Biome shareholders.
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“This transaction allows Biome to become the largest single shareholder in a much bigger operating platform than it could currently create on its own, an ability to address our significant liabilities stemming from our previously abandoned capital intensive strategy, and it gives Biome greater flexibility on how to evolve the business in this fast-changing industry,” Malik.
Highland Grow is licensed by Health Canada to cultivate, process and distribute cannabis from its Antigonish, Nova Scotia facility.
“We are extremely excited to welcome Highland Grow to the MYM family”, said Robin Linden, interim CEO of MYM Nutraceuticals in the statement. “The Highland Grow cultivation and distribution facility in Nova Scotia will expand MYM’s cannabis footprint, enabling us to immediately supply the Canadian market with premium craft cannabis, including product grown in our Quebec-based facility.”
Deal terms
The term sheet for the acquisition consists of a C$1.5 million cash payment by MYM, which will also issue just over 42.8 million shares priced at C$0.065 and around 132.6 million non-voting Class A special shares that may be exchanged for MYM shares.
As part of the transaction, MYM will loan Biome C$1 million which, in conjunction with the cash proceeds from the acquisition, will be used towards Biome’s debt obligations.
The MYM loan has a term of 18 months with an option to extend an additional six months at Biome’s discretion and subject to an extension fee. The loan bears an interest rate of 17.5% per annum. Biome will also pay a set-up fee equal to 3% of the amount advanced and an immediate interest payment equal to 5% of the amount advanced separate from and in addition to the 17.5% per annum interest payable under the loan.
Requiring no further loan of cash by MYM, the principal amount of the loan will be increased by the amount of certain liabilities of Highland Grow, which will continue to be owing by the subsidiary post-closing estimated to be approximately $1.4 million.
In connection with the pre-payment of the loan facility, Biome has agreed to pay a pre-payment fee of $44,402.81 via the issuance of 417,535 Biome shares priced at C$0.08.
As part of the deal, Biome director Michael Wiener will resign from the board to take the reins as CEO at MYM.
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