IM Cannabis reports closing of IMC Holdings share sale after C$3M advance
IMC Holdings retains liabilities under a C$9.4M cap subject to mutual adjustment; direct subsidiary debts are excluded from that cap.
Theo Marchetti
Israel's medical cannabis operations remained with their listed parent after the Sept. 29 sale of all shares in a European-focused holding company. IM Cannabis Corp. NASDAQIMCC said in its Sept. 29 release it had received a C$3 million advance before closing. It gave an unaudited estimate that the sale will lift shareholders' equity by about C$3 million, subject to final accounting.
IM Cannabis shares NASDAQIMCC closed at US$2.48 at 4 p.m. EDT on Sept. 28, before the sale announcement.
Slil.com Holding Ltd. acquired all issued and outstanding shares of I.M.C. Holdings Ltd. under an Aug. 16 share purchase agreement. The Sept. 29 closing release says the retained liabilities remained obligations of IMC Holdings after Slil acquired its shares. IM Cannabis's Aug. 17 announcement says the agreement capped those liabilities at C$9.4 million, subject to adjustment by mutual agreement, while excluding direct subsidiary liabilities from the ceiling.
Before closing, IM Cannabis moved its Israeli operations out of IMC Holdings and retained them. The company now operates its Israeli medical cannabis import, distribution, pharmacy and online platform businesses, while the sold holding company owns interests in Adjupharm GmbH, Xinteza API Ltd. and Shiran Societe Anonyme.
The Payment Came Before Closing
The Aug. 16 agreement put Sept. 30 as the outside closing date. The Sept. 29 release said the conditions to closing had been satisfied or waived. Neither IM Cannabis nor IMC Holdings issued securities as consideration, and the advance was paid before the Sept. 29 closing.
IM Cannabis expects the sale to reduce liabilities associated with IMC Holdings on its consolidated balance sheet and to improve working capital. The release did not quantify those liabilities.
"The actual accounting impact of the Transaction may differ from this estimate and will be reflected in the Company's financial statements for the applicable reporting period," IM Cannabis said in its Sept. 29 release.
Slil is beneficially owned and controlled by IM Cannabis chief executive Oren Shuster, who is also a director, securityholder and debtholder. Shuster declared his interest and did not vote on the transaction. An independent board committee recommended approval after reviewing the terms.
The company said it used financial hardship exemptions under Multilateral Instrument 61-101, from a formal valuation and minority shareholder approval. It said its board and at least two-thirds of independent directors found the terms reasonable in light of its serious financial difficulty. A consultant supplied a financial analysis, which the company said was not a formal valuation.
Israel Remains the Operating Business
IM Cannabis's exit from German medical cannabis operations contrasts with Canopy Growth Corporation TSEWEED NASDAQCGC, which said Sept. 28 it appointed a Germany country manager effective Oct. 1 to lead its commercial strategy there.
Read more: Canopy Growth Corporation names Sebastian Blöte as Germany country manager
IM Cannabis is evaluating opportunities beyond its remaining cannabis business. Its Sept. 23 announcement described a separate, non-binding acquisition proposal in unmanned aircraft systems, which was not part of the completed sale. The parties said they aim to sign definitive documents within 60 days of that announcement.
That target puts the next stated milestone around Nov. 22. The Sept. 29 sale's estimated equity effect awaits the financial statements for the applicable reporting period.
