Acreage Holdings, Inc. (“Acreage”) (CSE: ACRG.A.U, ACRG.B.U), (OTC: ACRHF, ACRDF) a multi-state operator of cannabis cultivation and retailing facilities in the U.S., announced today it has completed the sale of US$28.0 million in promissory notes receivable (the “Notes”) that it received as consideration for the previously announced sale of its Acreage Florida subsidiary to Red White and Bloom Brands, Inc. (CSE: RWB) (OTCQX: RWBYF).
The Notes, which are due from Red White and Bloom Brands, Inc., were sold to Viridescent Realty Trust, Inc. (“Viridescent”) for total cash proceeds of US$26.0 million. This represents the upper range of the estimated fair market value of the Notes as determined by an independent financial advisor retained by Acreage to consider the fair market value of the Notes. No additional fees or commission were paid related to the sale of the Notes.
US$21.0 million of the proceeds from the sale of the Notes will be used to repay IP Investment Company, LLC (“IP Investment”) as part of a credit agreement previously announced on February 7, 2020. This amount was borrowed from IP Investment in order to post collateral in a Credit Agreement with SAFB Harmony LP, as agent for certain lenders, also announced on February 7, 2020 (the “SAFB Credit Agreement”). The collateral, which is held in a restricted account, will be released to repay the SAFB Credit Agreement and also result in the return of approximately $1.0 million to Acreage.
“The sale of the promissory notes that we received as consideration for the sale of our Florida operations, as well as the use of these proceeds to extinguish other debts of the Company, represent an important next step in strengthening our balance sheet,” said Steve Goertz, Chief Financial Officer of Acreage. “As we have previously communicated, Acreage remains focused on our three key strategic objectives – driving profitability, strengthening our balance sheet, and accelerating our growth in our core markets.”
Viridescent is an entity controlled by Kevin Murphy, the Chairman of the Board of Directors of Acreage. Because of Mr. Murphy’s interest in Viridescent, the sale of the Notes to Viridescent constitutes a “related party transaction” within the meaning of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Company has relied on the exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101 at Sections 5.5(a) and 5.7(1)(a) of MI 61-101 in respect of such sale on the basis that neither the fair market value (as determined under MI 61-101) of the subject matter of, nor the fair market value of the consideration for, the transaction exceeded 25% of the Company’s market capitalization (as determined under MI 61-101). Further details will be included in a material change report to be filed by the Company. The material change report will be filed within 10 days of the date sale of the Notes.
