Calgary company acquires Delta 9 Bio-Tech

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This article was published 30/12/2024 (277 days ago), so information in it may no longer be current.

A Calgary-based cannabis extracts and derivatives company has acquired the production operations of Delta 9 Cannabis out of the court-appointed creditor protection process.

Simply Solventless Concentrates Ltd. will pay $3 million for the Manitoba operation, which generates about $12 million in annualized revenue.

It was part of a lengthy sales and investor solicitation process that began at the end of July, shortly after Delta 9 sought court approval for creditor protection through the Companies’ Creditors Arrangement Act.

The deal for all issued and outstanding shares of Delta 9 Bio-Tech Inc. does not include real estate (a 96,000-square-foot, light industrial building in the Transcona neighbourhood).

Sources told the Free Press details of the sale of the building to a third party and SSC entering into a lease of the Winnipeg facility will be disclosed in court filings this week in Calgary, where Delta 9’s CCAA proceedings have been heard.

SSC, formed in 2020, makes cannabis extracts and derivatives. It went public in a reverse takeover at the end of 2023.

In 2024, it made a number of acquisitions of branded products, including Edmonton-based ANC Inc., a leader in infused pre-roll manufacturing in Canada. It has annualized revenue of about $10 million.

Prior to the ANC acquisition, SSC had revenue for the first nine months of 2024 of $14.5 million.

SSC does not produce cannabis flower itself. With its recent acquisitions, SSC indicated it felt the need to secure its own reliable source of raw material.

In a release Monday, the company said the Delta 9 Bio-Tech “acquisition will allow SSC to participate in the dried flower product category, which is the largest cannabis product category in Canada, with a market share of approximately 40 per cent. … Vertically integrating upstream into cultivation is a core SSC strategic mandate due to a tightening supply demand dynamic pushing cannabis prices upward.”

Although the Canadian cannabis industry has been dealing with a substantial oversupply issue for some time, it is starting to balance out, according to sector observers.

Delta 9’s cannabis production operation has the capacity to produce 9,000 kilograms of dried flower per year.

John Arbuthnot, co-founder and former CEO of Delta 9 Cannabis, said close to 100 prospective buyers were sent information kits soliciting interest in Delta 9 Bio-Tech and 16 signed non-disclosure agreements.

“I would say there was a fairly robust sales process and a good degree of engagement from a large number of parties,” he said Monday.

The facilities include 297 custom-designed automated grow pods.

SSC officials, who were not available for comment Monday, made it clear the intention is to continue operating the Winnipeg facility as is, perhaps even adding additional capacity.

“The good news of the announcement this morning is that all workers at Delta 9 Bio-Tech will be keeping their jobs,” Arbuthnot said.

“We didn’t quite get it in for Christmas, but before the new year is not bad.”

Earlier in the year, the receivership sold off Delta 9’s business providing turnkey grow pods to other licensed producers to a Waterloo, Ont., business in the controlled-environment agriculture sector.

The acquisition announced Monday comes with $60 million worth of tax loss carryovers SSC will be able to use to decrease its own tax exposure.

Toronto-based Fika Group is the so-called “plan sponsor” of Delta 9’s creditor protection process. It will acquire Delta 9’s chain of 37 retail stores in Manitoba, Alberta and Saskatchewan.

(Four underperforming stores have closed since mid-July, when the creditor protection process began.)

As part of those responsibilities, it will pay off the approximately $40 million owed to SNDL Inc., another Calgary company that owns liquor and cannabis stores.

Delta 9 had breached a lending covenant with SNDL that triggered a demand payment to SNDL and the subsequent CCAA filing.

martin.cash@freepress.mb.ca