Valens Expands Operations in Toronto With it's New Acquisition of a Leading Hard Cider Manufacturer

Valens acquires Pommies Cider Co, a leading Ontario-based beverage company

Valens GroWorks Corp, a vertically integrated provider of industry leading extraction products and services, including a diverse suite of extraction methodologies, next generation cannabinoid delivery formats and an ISO 17025 accredited analytical lab, is pleased to announce that it has acquired all of the issued and outstanding shares of Southern Cliff Brands Inc. (d/b/a Pommies Cider Co.) ("Pommies") in a cash and stock deal (the "Acquisition").

The Acquisition and all planned capital expenditures are fully funded with cash on hand and current and projected cash flow from operations.

Overview of Pommies

Pommies is a leading hard cider manufacturer in the Greater Toronto Area and operates a 32,000 sq. ft. facility currently used to manufacture the company's existing line of Pommies-branded cider.

The facility is equipped with industrial scale fermentation and mixing tanks, canning and bottling lines, labeling equipment, and a commercial shipping and receiving bay. In December 2018, Pommies submitted its Health Canada application for a micro-processing licence.

The former owners and founders of Pommies, Nick and Lindsay Sutcliffe (collectively, the "Vendors"), will be joining Valens following the Acquisition, bringing with them more than 20 combined years of experience in the beverage alcohol industry, having founded Pommies in 2010 as one of the first alcoholic cider beverages in the market and grown it to a highly successful,  multi-million dollar business. The team's knowledge and expertise will be a significant asset moving forward. In conjunction with the Acquisition, Valens expects to enter into a lease for the Pommies facility with a 10-year term and a subsequent renewal option for an additional 10 years.

Platform for Infused Beverages and Edibles


The Acquisition adds a new platform to the Valens portfolio that will bolster the Company's white label product offerings in categories such as beverages and edibles. Initially, Valens intends to leverage the beverage manufacturing infrastructure of the Pommies facility and the know-how of its founders to capitalize on cannabis-infused beverage white labeling opportunities, including Valens' existing agreement with the cannabis division of Iconic Brewing and multiple ongoing discussions with other potential partners. Valens has pilot-scale capacity for cannabis-infused beverages today and expects to produce beverages at mass scale in the first half of 2020.

The Company is leveraging existing beverage infrastructure at the Pommies facility and is budgeting for approximately C$10 million of capital expenditures at the facility over the next 12 months, following which Valens expects the facility to have a 40 million unit capacity for beverages alone, not including edibles.

The planned capital expenditures to bring the facility into full operation are fully funded with cash on hand and projected cash flow from operations. "We are thrilled to add Pommies to our growing Canadian platform," said Tyler Robson, CEO of Valens. "In Canada, alcoholic beverages generated nearly C$24 billion of retail sales in 2018.

At Valens, we expect that extract-based cannabis products, and infused beverages in particular, could disrupt beverage alcohol sales where monthly per capita spend is roughly 16 times higher compared to legal cannabis. We will be able to leverage our purification and formulation knowledge, as well as the SoRSETM emulsion technology to create an exciting new adult beverage category that rivals alcohol, soft drinks and water with our current and future partners.

Adding the Pommies facility and team to our platform gives Valens the tools and expertise needed to bring competitive beverage alcohol substitutes to market and capitalize on this massive market opportunity."

Geographic Expansion

Valens chose Ontario as the province to establish its second operating facility as it brings a number of strategic advantages. First, the geographic expansion to Eastern Canada will allow the Company to better serve its growing customer base across Canada as the Pommies facility is located a short distance from Highway 400 in the northern portion of the Greater Toronto Area and is a 30-minute drive from Toronto Pearson International Airport.

Second, Ontario is Canada's most populous province and currently the largest market for legal cannabis consumption based on recent sales data from Statistics Canada.

The geographic diversification and co-location of Valens' beverage, edibles and extraction capabilities will also provide cost and efficiency advantages, allowing Valens to be more responsive to both its licensed and unlicensed customers.

Speed to Market

With the existing facility and beverage infrastructure, the beverage expertise of the Pommies team, and the pending micro-processing licence application, Valens expects that the Acquisition provides the Company with a 9-month head start towards the launch of operations at the new facility and the production of cannabis-infused beverages. Furthermore, upon receiving a micro-processing licence at the facility, Valens intends to amend it to a standard processing licence over time, providing optionality for the facility to scale with demand.

Transaction Summary

The purchase price at closing was C$6.0 million, comprised of C$3.5 million in cash (net of certain closing indebtedness of Pommies) and C$2.5 million in value of common shares of the Company (the "Common Shares") (being 604,052 Common Shares), of which C$750,000 in value of Common Shares (being 258,880 Common Shares) were placed into escrow for indemnity purposes. Up to C$1.5 million (C$0.5 million in cash and C$1 million in value of Common Shares, being 345,172 Common Shares) of further consideration was placed into escrow and is subject to release upon the achievement of certain earn-out milestones relating to licensing, operational and financial performance (the "Milestones Consideration").

All Common Shares pursuant to the Acquisition were issued at a price representing the ten (10) day volume-weighted average price of the Common Shares on the TSX Venture Exchange ("TSXV") as of the close of trading on November 7, 2019. The Acquisition remains subject to approval from the TSXV and is expected to constitute an "expedited acquisition" in accordance with Policy 5.3 of the TSXV. 

All Common Shares issued in connection with the Acquisition will be subject to a restricted period of four months and one day. There are no finders' fees payable by the Company in connection with the Acquisition. The Vendors are each arm's length parties to the Company.

Co-Manufacturing Plans

The existing Pommies business and branded products will continue to service its existing markets. Valens intends to establish a co-manufacturing agreement at a partner facility to continue supplying the market with Pommies' line of hard ciders as the Pommies facility transitions to producing cannabis-infused beverages and edibles.

To learn more about Valens GroWorks Corp visit their Company site here.

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Niki Mohazeb
Niki Mohazeb

Niki is a Sydney based writer, with a passion for promoting the health benefits of medicinal cannabis. Niki also enjoys researching and writing about the future of cannabis along with the many other benefits that the plant provides, such as the diverse utilities of hemp.

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