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New cannabis company Zenabis is born from yet another reverse takeover in cannabis

Zenabis is the brand new Canadian cannabis company spawning from the latest reverse takeover in the industry. Bevo Agro Inc. (TSXV:BEVO) and privately-owned Sun Pharm Investments Ltd. signed an agreement on October 4. The official announcement came in the form of an investors presentation on the new Zenabis website this past Friday, October 12.

Through the RTO, Zenabis will operate 3.5 million square feet of indoor and outdoor growing space in British Columbia, Nova Scotia, and New Brunswick. Per the agreement, Bevo’s existing greenhouses in Langley, BC will also all be outfitted with new technology and lighting systems to compete with the expanding market. According to the presentation, two of Zenabis’ four cultivation facilities are licensed and operating. The company expects the remaining two to start harvesting in 2019.

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"Our primary goal with this merger is to expand Zenabis' capacity to supply high-quality cannabis for worldwide distribution,” Zenabis’ new CEO Rick Brar stated in the press release. “We will achieve this by taking advantage of Bevo's greenhouse growing expertise to cultivate high-quality cannabis. This is a unique partnership that gives Zenabis a significant advantage among Canadian producers as we continue to grow our business to meet Canadian and international demand."

So far, the new company’s investor presentation only lists domestic distribution opportunities, including Sun Pharm’s partnership with the British Columbia Liquor Distribution Branch. Zenabis is also limited to the cultivation and sales of dried flower at the moment, but there are future licensing plans for the sale of cannabis oils, edibles, and beverages.

The agreement also includes Bevo’s newest subsidiary, CubicFarms. CubicFarms is an agrotech company that uses the latest in automated, large-scale farming operations that recycle water. Per the agreement, as Bevo becomes Zenabis, over 40 percent of CubicFarm’s ownership will be distributed among Bevo’s shareholders. CubicFarms will then list on the TSXV as a separate company owned by Zenabis Ventures.

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Uniquely, Bevo also announced a “Greenhouse Acquisition” that includes a purchase of over 10 acres of greenhouses and another 50 acres of land from a third party. This land is intended to continue services to Bevo’s existing customers before the cannabis amalgamation. Previously, Bevo was involved in providing propagated plants to greenhouses and field farms across North America. This RTO is Bevo’s first foray into the cannabis industry.

This is not the first time investors have seen a reverse takeover in cannabis. An RTO can protect smaller, private companies like Sun Pharm from the risks of an IPO while allowing the companies to continue operating their business without the distractions of a public offering. The strategy is becoming more and more mainstream in Canada with cannabis companies usually looking for an uplisting on one or more of Canada’s stock exchanges.

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No official announcement has been made from Zenabis regarding any such uplisting. According to the press release, this RTO is still subject to approval by the TSX Venture Exchange. In the meantime, trading of Bevo’s shares will be halted until all agreement documents are submitted and approved.

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