Ontario marijuana producer Peace Naturals has been hit with a law suit by Tweed Inc. for $12 million dollars in respect to 12 Mother Plants, read Statement of Claim pdf here or article below:
Canopy Growth Corporation (V.CGC) looks to buy Peace Naturals – or sue it into the ground
by Chris Parry, Stockhouse.com
Just days before Peace Naturals was due to close a takeover deal that would have financed them going forward, the medical marijuana company formerly known as Tweed, Canopy Growth Corporation (TSXV:CGC, Forum), has filed a lawsuit against them for the sum of $12m, citing accusations of gross negligence and/or breach of contract.
Paperwork filed by Canopy lawyers in the Ontario Supreme Court suggests CGC subsidiary, MedCanAccess, had left 20 plants with Peace Naturals on a temporary basis while those two companies were planning a takeover deal in early 2015. 12 of those plants, according to the suit, subsequently died.
MCA values those plants at $1m each, claiming they were the result of many years of selective breeding to help with specific symptoms, and cannot be replaced.
The lawsuit is exactly what Peace Naturals didn’t need, being as they’ve been rolling about wrestling with their former stakeholder, Pharmacan (TSXV:MJN, Forum), for several months, are trying to close a takeover by the Barnes Family Trust which is scheduled to go through on December 11, and were already involved in an earlier lawsuit with MedCanAccess over an aborted takeover offer by PN of MCA in March 2015.
Knowing this, according to my sources, in what may be a genius example of opportunism, Canopy made an offer to acquire Peace Naturals, six days before the latest lawsuit was filed.
“MCA was the owner and developer of 20 genetically unique marijuana plants that it had specially developed for commercial breeding,” claims the lawsuit. “The mother plants were developed through an ongoing selective breeding process over a course of up to 8 years, a painstaking process requiring hundreds of seeds to be planted and then narrowed down over many generations of grow cycles.”
The paperwork claims PN had told MCA in September that six of their twenty plants had died, but that the others were safe. A month later, another six were dead. Tweed filed paperwork to take the remaining plants, but PN refused to release them until ‘certain demands’ were met. Canopy says, once they arrived to take the remaining plants, they observed ‘fungus gnats in their vicinity’ and spider mites on one plant.
MCA also claims PN didn’t take cuttings of the dying plants, which would have kept the bloodlines alive, and also lost track of the plant data, so it now doesn’t know which plant is which.
Peace Naturals has not publicly responded to the suit, but whether the suit has merit or not is almost immaterial; the company most certainly does not have the cash for (another) protracted legal fistfight, and if it’s acquisition by BFT is stalled by this suit, the company would be in genuine financial peril.
That BFT deal already involves a $2.5 million hold back pending the earlier MCA lawsuit. Another $12m held back would turn the deal upside down, which would make Canopy’s new offer the only game in town and PN’s only way to stay afloat.
Details of the Canopy offer to take over Peace Naturals have not been revealed.
Peace Naturals killed a proposed takeover of MedCannAccess in March of this year when, according to the CEO, an official with Health Canada called to warn the company would want to be ‘very careful’ how it structured MCA’s retail activites going forward. PN subsequently killed the deal, which saw MCA file suit for breach of contract.
CGC subsequently bought MCA to add to its stable of companies, which includes big player Bedrocan.
CGC revenues grew 44% in fiscal 2016 Q2 numbers posted last week. The company has a $258m market cap. The company recently raised $14.3m in a bought deal financing.
Article source Stock House