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Law360 (June 2, 2020, 6:11 PM EDT ) A Canadian court on Tuesday approved the nearly $10 million sale of debt-ridden marijuana grower James E. Wagner Cultivation Corp. to a cannabis lender, in a deal the company said will prevent a bankruptcy.
A unit of Trichome Financial Corp. will scoop up virtually all of James E. Wagner's assets as part of the deal cleared by the Ontario court overseeing its restructuring. Trichome set a price floor for the sale through a stalking horse bid of 13.45 million Canadian dollars, which went unmatched. The deal is expected to close June 30.
James E. Wagner told the court the sale would preserve the company's business and save roughly 160 jobs. Court filings show 26 potential buyers signed confidentiality agreements and conducted due diligence on the company, although none floated bids.
Toronto-based Trichome, a cannabis-focused investment shop, tossed James E. Wagner a $2.8 million lifeline in April as the grower sought creditor protection under a Canadian law known as the Companies' Creditors Arrangement Act, which also allowed the company to stay legal proceedings against it while it restructured.
James E. Wagner said it needed the funds "largely due to the impact of COVID-19 on sales, as well as certain sales that were forecasted to occur in these proceedings but are now forecasted to occur at a later date," according to its court filings.
In February 2019, Trichome loaned James E. Wagner $5.5 million to finance the grower's expansion. But the company's earnings never improved, and its stock price declined steadily to its current price of less than half a cent per share.
James E. Wagner, which began growing medical marijuana in 2007, is one of scores of cannabis companies to be laid low by an industrywide contraction last year that scuttled mergers and acquisitions and tanked the valuations of once high-flying firms.
The bleeding has been especially pronounced in Canada, where oversupply and slow approvals of cannabis licenses forced cannabis companies to pull back investment and postpone expansions.
U.S. cannabis companies were not spared, however, and the COVID-19 pandemic added to the industry's woes. Firms that were starved for capital before the pandemic are finding it even more difficult to lure investors amid intense economic uncertainty.
A James E. Wagner spokesman declined to comment on the deal Tuesday.
--Editing by Stephen Berg.
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