Canadian cannabis company Entourage Health Corp. has announced plans to transition to a private entity, striking a deal with its key investor and lender, the LiUNA Pension Fund of Central and Eastern Canada (LPFCEC). The agreement could reshape the company’s future, signaling potential growth and stability while addressing existing challenges.
Shareholders Offered Immediate Payout in Buyout Agreement
Under the terms of the purchase agreement with 1001007762 Ontario Inc., an affiliate of LPFCEC, Entourage shareholders will receive CA$0.005 per common share. The offer, though modest, promises an immediate payout to investors during a turbulent period for the company.
Jason Alexander, director and chair of the special committee of independent directors for Entourage, expressed confidence in the decision. “The proposed transaction offers the most favorable outcome for the company and its shareholders given the current challenges and the impending expiration of the forbearance agreement,” Alexander said in a statement. He emphasized that the deal positions the company for flexibility and future growth while delivering tangible value to shareholders.
Debt Holders Included in the Transaction
Entourage has also addressed certain convertible debt obligations as part of the arrangement. The company plans to pay up to CA$250,000 to specific convertible debt holders under the same terms. Additionally, a debt settlement agreement was reached with holders of CA$1,013,050 in unsecured debt through one of the company’s subsidiaries.
This move comes as Entourage grapples with ongoing financial challenges, including past breaches of credit agreements. In October, an LPFCEC affiliate extended the company’s credit line by an additional CA$2.5 million, providing a financial lifeline while negotiations continued.
Pension Fund Strengthens Grip on Entourage
LPFCEC, an employer-based pension fund managing over $12 billion in assets, is central to the transaction. Another affiliate of the pension fund, 2437653 Ontario Inc., has guaranteed the cash offer, underscoring LPFCEC’s long-term commitment to the cannabis operator.
Entourage directors, executives, and shareholders controlling 27% of the company’s common stock have already agreed to the deal. However, broader shareholder approval is required. For the transaction to proceed, it must gain support from two-thirds of shareholders and a majority of non-purchaser-affiliated shareholders during a meeting next month.
If approved, the deal will proceed to court approval and other customary closing conditions before finalizing.
Implications for Public Trading and Regulatory Changes
Once the transaction is completed, Entourage’s common shares, traded under the symbol ENTG.V on the TSX Venture Exchange, are expected to be delisted. This step will mark the end of Entourage’s tenure as a publicly traded company.
The company also plans to file an application with the Ontario Securities Commission to cease its status as a public issuer. These changes will streamline Entourage’s operations and eliminate the regulatory burdens associated with public trading, potentially allowing the company to focus more on core business activities.
What Lies Ahead for Entourage?
Entourage’s decision to go private reflects the broader challenges faced by the cannabis industry. A mix of regulatory hurdles, competitive pressures, and financial instability has left many operators reevaluating their business models.
By leveraging the financial backing and strategic input of LPFCEC, Entourage aims to weather these challenges and reposition itself for growth. However, the deal’s success hinges on shareholder approval and the fulfillment of regulatory conditions.