HIGHLIGHTS
- Ascent agrees, for a second time, to sell its Canadian assets to Gulf Bridge
- Deal does not require shareholder approval, according to Ascent CEO
- Unclear who is behind Gulf Bridge, but clues point to a Kuwaiti billionaire
Ascent Industries Corp. has agreed to sell its Canadian cannabis assets to Gulf Bridge Ltd. for an undisclosed amount of money, the company announced on Monday. It’s the second deal Ascent has signed with the Cayman Island-domiciled firm, after an earlier round of negotiations collapsed in February.
The Supreme Court of British Columbia, which granted Ascent creditor protection earlier this month, still needs to approve this latest deal, which does not include Ascent’s U.S. or international assets. The agreement requires court approval by March 22 and closure by April 15.
The sale does not require shareholder approval, according to Ascent’s interim-CEO Blair Jordan. That could upset a group of activist shareholders who claim to control more than 50 per cent of the company and opposed the earlier deal with Gulf Bridge.
“We are in CCAA, so [the] only approval required is that of the court,” Mr. Jordan wrote in an e-mail to Cannabis Professional. “There is not much we can say at this time. The transaction is now with the courts to decide.”
The agreement comes six months after Health Canada suspended Ascent’s cannabis licenses for black market activity that allegedly took place after its subsidiary Agrima Botanicals received a legal license. The suspension, combined with Health Canada’s later announcement that it planned to permanently revoke the licenses, led to a collapse in Ascent’s share price and the resignation of its founders and senior management team.
The company’s new management team, advised by Clarus Securities Inc., has been trying to sell off cultivation and extraction assets in British Columbia since late November to meet loan payments and recoup some value for investors. It’s been a long and convoluted process, marked by failed negotiations and activist opposition.
The first round of bidding took place in December. Twenty-two companies submitted expressions of interest, and five submitted credible bids. Gulf Bridge emerged as the winner, beating bids from four Canadian licensed producers.
In January, Gulf Bridge consolidated Ascent’s debt into a $7-million mortgage, becoming the company’s main creditor. However, Gulf Bridge ended its acquisition negotiations in early February after the activist group, made up of early Ascent shareholders and former management, formed a voting block to oppose the sale.
Ascent negotiated with several other potential buyers in February, before deciding to seek creditor protection and inviting a second round of bids, ending on March 7.
Despite cancelling its earlier negotiations, Gulf Bridge took part in this new bidding round and won again.
“At all stages of the [sales process], the prospective purchasers included some of the largest companies in the medicinal and recreational cannabis industry in Canada, including several that are publicly-listed on the Toronto Stock Exchange, NASDAQ, or Canadian Securities Exchange,” wrote Edward Drake, vice president of investment banking at Clarus, in an affidavit filed on March 11.
“The Transaction Team concluded that the bid submitted by Gulf Bridge is superior to the other bids and that a further canvassing of the market for potential purchasers would no result in a superior bid being received,” Mr. Drake wrote.
He noted that Gulf Bridge’s offer was all cash, could be closed quickly, and did not require third-party approval.
“Another positive aspect of the Gulf Bridge Bid that resonated with me and Senior Management pertains to Ascent’s current employees,” wrote Mr. Jordan in a March 15 affidavit. “Gulf Bridge does not currently have any presence or employees in Canada. As a result, in my opinion and in the opinion of Senior Management, there was a greater prospect of Ascent’s current Canadian employees being re-hired by Gulf Bridge.”
It remains unclear exactly who is behind Gulf Bridge, although there are clues pointing to Kuwaiti billionaire Bassam Alghanim. Gulf Bridge is domiciled in the Cayman Islands and registered to the address of Appleby, a prominent offshore law firm that was the subject of a large data leak known as the Paradise Papers.
According to Paradise Paper data, accessible through an online portal run by The International Consortium of Investigative Journalists, Mr. Alghanim is a shareholder of Gulf Bridge Ltd.
Furthermore, the Ascent deal is being done through a Gulf Bridge subsidiary called BZAM Management Ltd. Mr. Alghanim is the director of a U.K. company called BZAM International Ltd.
Mr. Jordan did not respond to a request for comment about Mr. Alghanim.
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