LEXPERT MAGAZINE
|
OCTOBER 2017 13
LEXPERT: A "marriage" between a produc-
er of greenhouse vegetables and a medical
cannabis company is unique. What were
the advantages of partnering up on this?
James Beeby, McCullough O'Connor Irwin
LLP (for Emerald Health): Well, you have a
licensed producer of marijuana with deep
experience in the life science industry com-
ing together with a company with a large-
scale agricultural business both bringing
their own unique expertise and perspective
to the table. To me this really seems to be
a case where the whole is greater than the
sum of the parts.
Michael Zackheim, Torys LLP (for Village
Farms): It's unique in that it brings together
two organizations with complimentary ex-
pertise. Village Farms International is one
of the largest, most experienced and tech-
nically advanced greenhouse growers in
North America. Emerald Health has sig-
nificant cannabis industry experience, in-
cluding a portfolio of high-quality genetics
and refined standard operating procedures.
Because cannabis is an agricultural crop,
significant agricultural growing experi-
ence is essential. But many in the Canadian
cannabis sector have limited experience in
this, which can pose a significant business
risk. e JV is also unique in terms of con-
verting an existing, large-scale greenhouse
operation to cannabis production. e use
of existing facilities provides for speed to
market and, at 1.1 million square feet of
growing space at the initial greenhouse, it's
among the largest facilities — existing or
planned — in Canada.
Sabrina Gherbaz, Torys LLP (for Village
Farms): Village Farms has an operational
greenhouse which can be converted into
a cannabis growing facility more quick-
ly and at a lower cost than constructing a
new greenhouse cannabis growing facility.
Emerald has a seasoned management
team with experience in securing licences
to cultivate medical cannabis under the
Marihuana for Medical Purposes Regula-
tions (MMPR) and extensive downstream
product development expertise. e com-
bination of the existing greenhouse fa-
cility, meaningful growing expertise and
seasoned management team with licensing
experience makes Village Farms and Emer-
ald natural partners who should be able to
quickly and cost effectively service the rec-
reational cannabis market once legalized.
Beeby: A key component to Emerald's
business plan is to rapidly and cost-effect-
ively scale up production capacity. Part-
nering with a company that already had
much of the infrastructure in place really
helps Emerald to accelerate its timeline to
scaled-up production and also gives Em-
erald a joint venture partner with proven
expertise in managing large-scale green-
house assets.
Flexibility Wins the Race
LEXPERT: Given the uncertainty about
how the opening of the recreational market
will play out, why was a flexible JV the way
to go for both parties?
Beeby: ere is huge uncertainty about the
regulatory regime. Even though we've got
a dra Cannabis Act now we're still only
dealing with a 30,000-foot picture and
most of the implementation still needs to
be worked out. Flexibility is key right now
and the parties are positioning themselves
as best they can to take advantage of the
potential opportunities. Getting the initial
greenhouse licensed and converted is going
to meet the JV's needs for some time but if
all goes well the options allow the JV to ef-
fectively quadruple its growing space.
Gherbaz: ere is definitely a lot of uncer-
tainty in the cannabis sector surrounding
such things as the implications of provin-
cial legislation, distribution, branding
and market demand. e joint venture
was designed to include significant built-
in flexibility. Some of the mechanisms
that provide flexibility are the manner in
which material decisions are made, op-
tions in favour of Pure Sunfarms to lease
or acquire additional Canadian green-
houses from Village Farms and an ability
of Pure Sunfarms to distribute cannabis
to any legal buyer — not just Emerald —
in both the medicinal and recreational
markets. Currently, the joint venture
is focused on growing and distribution
within Canada but may look to get an ex
port licence in the future.
Village Farms and Emerald Health built their cannabis partnership fast — and on a tight deadline
INTERVIEW BY GENA SMITH
Stephen
Ruffini
EVP, CFO
Village Farms
International
Sabrina
Gherbaz
Torys LLP
(for Village
Farms
International)
James
Beeby
McCullough
O'Connor
Irwin LLP (for
Emerald Health
Therapeutics)
ON THE DEAL
When it comes to cannabis, "joint" venture takes on a whole new meaning. Amid huge
regulatory uncertainty — and the looming deadline next July — lawyers understood the
need for flexibility when structuring the JV that established Pure SunFarms Corp.
Michael
Zackheim
Torys LLP
(for Village
Farms
International)
