Manitoba cannabis company seeking creditor protection
With a $28 million tab and no immediate way to pay it off, changes are coming to a Winnipeg-based cannabis company.
Delta 9 announced late Monday in a news release it is seeking creditor protection from Alberta’s Court of King's Bench.
This comes as it owes more than $40 million to Calgary-based cannabis company SNDL Inc., which purchased the debt last week and demanded Delta 9 repay around $28 million.
Delta 9 said in a news release that a number of reasons led to the decision to seek creditor protection including its "inability to repay such a debt over the next 12 months" and SNDL’s "aggressive actions" in demanding the repayment.
Along with the creditor protection, Delta 9 said it has entered an agreement with Ontario-based cannabis retailer FIKA, which will provide up to $16 million to help pay off the debt, but in return, wants to acquire Delta 9's retail stores, logistics, and distribution business.
“We appreciate the hard work of all of Delta 9’s employees, management, executive, and board of directors over the past twelve years to help create what has been an incredible growth story for Delta 9,” said John Arbuthnot, the CEO of Delta 9 in the release.
“We look forward to working with FIKA through the restructuring process to unlock the value of Delta 9’s assets for stakeholders, and to create the next chapter of growth for Delta 9.”
The company noted all of its directors other than John and his father Bill Arbuthnot have resigned.
Speaking with CTV News Winnipeg Tuesday afternoon, John said the plan would see FIKA take over the retail business, making Delta 9 a private entity.
"It is business as usual through this process. Stores will remain open, employees will keep coming to work across our network of businesses," he said.
"We don't anticipate any material changes, both through the process or immediately after. From our perspective, we have built a group of businesses that are quite sound, that have staying power here within our industry."
He noted there has been "escalating hostilities" from SNDL and the creditor protection will give the company time to work with FIKA to take steps toward the company's future.
Delta 9 was established in 2012 as a medical cannabis distributor. It became a publicly traded company in 2017.
In January 2023, the company laid off 40 employees. It was part of Delta 9’s plan to streamline cultivation and capacity at its Winnipeg facilities. At the time, the company said it was to also reduce company and investor costs.
In Manitoba, there are currently 209 Manitoba Retail Cannabis Licences according to the Liquor, Gaming and Cannabis Authority of Manitoba. Since the legalization of cannabis in 2018, the number of pot shops in the province has been steadily growing.
Wenlong Yuan, a professor of entrepreneurship and innovation at the University of Manitoba, said the growth may begin to slow down.
“We have seen lots of booming of the industry. We also see lots of ups and downs of the industry,” Yuan said. “I think the growth is still there. The only thing is, it's not really growing as fast as what we saw in the past.”
Yuan noted it is still an extremely young industry and more change could come in the future.
"So I think the other part of the question that I think about, is we don't really know how the regulation will continue to change."
He said the industry has been calling for further deregulation of the market and that could impact how businesses perform.
"So in that sense, the current number of stores may actually be fine if there is further deregulation … there is enough push from the industry for further changes in regulations. So when regulations change, the competitive situation will again change."
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