A private Montreal-based licensed producer is moving into a reverse takeover of Canada House Wellness Group (CSE: CHV), in a deal that’s expected to double annual production capacity.
In a statement on Tuesday, Canada House explains it has entered into a share exchange agreement with Montréal Cannabis Médical Inc. (MTL Cannabis), dated Aug. 9.
Canada House will operate under MTL Cannabis’s corporate name with its shares trading on the CSE after the transaction closes.
“In a market where close to 500 tonnes of unsaleable cannabis was destroyed across Canada, MTL [Cannabis] has proven that properly priced high-quality product sells through and thrives in the legal market,” said Chris Churchill-Smith, CEO of Canada House. “This transaction will create immediate value for shareholders through unique genetics and cultivation methods that will increase expected yields from our existing production footprint by five times, while better utilizing Canada House’s strengths and assets focused on the medical cannabis market.”
The success of MTL Cannabis’s Sage n’ Sour cultivar is noted as playing a role in the deal, which provides the Montreal flower-first company with more resources to meet market demand and a chance to build upon its brand portfolio while maintaining supply agreements, according to the statement.
Read more: MTL Cannabis is not for sale
MTL Cannabis will have access to more licensed cultivation space, more than doubling annual production capacity. MTL Cannabis will go from its 57,000 sq. ft. footprint and annual production capacity of 13,000 kilograms of dried flower to 120,000 sq. ft. and 30,000 kilograms of annual production.
“The consumer is asking for more of our flower, at the same quality as Sage n’ Sour. To meet their demands and build additional brands we need more space,” says MTL Cannabis COO Mitch Clement. “Staying committed to the craft of growing a consistent supply of high-quality cannabis for the masses is what we focus on daily. This approach ensures we produce great weed that the consumer wants and allows retailers to feel confident in the MTL products they carry.”
Along with bolstering production, the Canada House deal will also provide MTL Cannabis with a retail sales portfolio and access to brands distributed in Quebec as well as the company’s medical business, which has a direct-to-patient model focused on military veterans, and a clinic network with 14 locations.
Dried flower, the largest sector of the cannabis market, continues to lead in medical marijuana sales for veterans, accounting for more than 60 per cent of sales according to Canada House data.