Starseed

Canaccord Genuity Acts as Financial Advisor to Starseed on its C$78 Million Sale to WeedMD and LPF’s Concurrent C$25 Million Strategic Investment Directly Into WeedMD

Canaccord Genuity is pleased to announce that on November 29, 2019, its client Starseed Holdings, Inc. (“Starseed”), announced that it had entered into a definitive agreement with WeedMD Inc. (“WeedMD”) whereby WeedMD intends to acquire all of the issued and outstanding share capital of Starseed in an all-share transaction valued at C$78 million (the “Acquisition”). In addition, Starseed’s strategic investor, the Laborers’ Pension Fund of Central and Eastern Canada (“LPF”), will make a concurrent $25 million equity investment directly into WeedMD (the “Strategic Investment”, and together with the Acquisition, the “Transaction”). The Transaction bolsters WeedMD’s leadership position in the medical cannabis market through Starseed’s exclusive distribution and patient channels, provides important growth capital and fortifies WeedMD’s balance sheet (pro forma cash balance of $56 million as at September 30, 2019, including the Strategic Investment).

Under the terms of the Acquisition, WeedMD will issue 71.8 million common shares to Starseed shareholders. Based on WeedMD’s 15-day VWAP ended November 27, 2019 of $1.08, the implied total consideration to be received by Starseed shareholders is equal to C$78 million. Upon completion of the Acquisition and prior to the Strategic Investment, existing Starseed shareholders (excluding LPF), will own ~18% of the pro forma company (~16% including the Strategic Investment).

In addition, LPF has entered into a subscription agreement related to the Strategic Investment pursuant to which it has agreed to purchase subscription receipts for aggregate gross proceeds of C$25 million (the “Subscription Receipts”). The conversion of the Subscription Receipts is subject to a WeedMD shareholder vote relating to the creation of a new control person at WeedMD, as well as regulatory approvals. Upon completion of the Acquisition, LPF will own ~19.9% of the pro forma company (~29% including the Strategic Investment).

WeedMD is a federally-licensed producer of cannabis products for both the medical and adult-use markets, that owns and operates a 158-acre, state-of-the-art greenhouse, outdoor and processing facility located in Strathroy, Ontario. WeedMD also operates CX Industries Inc., which specializes in cannabis extraction and processing and operates out of a fully-licensed, 26,000 sq. ft. facility in Aylmer, Ontario. Starseed is a license holder under the Cannabis Act and is a leading company in Canada in the sale of medical cannabis to captive customer groups through drug benefit plans. Starseed has an exclusive partnership with Canada’s largest construction union, the Laborers’ International Union of North America (“LiUNA”). The combined entity provides for complementary operations across the value chain and creates significant and immediate cost and revenue synergies.

The Canaccord Genuity team included Jamie Nagy, Mark Silvestre, Peter Cheetham, and Yannik Spang with coverage and support from David Kassie.