A major cannabis producer in Leamington is admitting that some of its directors had a conflict of interest when it bought some Latin American (LATAM) operations.
However, a special committee review also concluded that the acquisitions by Aphria were within an acceptable range in value, albeit near the top, when compared to similar acquisitions by competitors. The review also involved independent physical inspections of the Argentina, Columbia, and Jamaica operations to verify they were in place and continued to develop according to Aphria's business plan.
Aphria said the acquisitions were approved by independent directors after obtaining a third-party fairness opinion, but certain non-independent directors of the company, who had conflicting interests in the acquisition, did not fully disclose that to the board.
The special committee was made up of independent legal advisor Lenczner Slaght Royce Smith Griffin LLP, independent forensic advisors Deloitte LLP, and independent financial advisors Duff & Phelps Canada Limited.
They reviewed Aphria's books, records and other documents, as well as meetings with certain financial and legal advisors to the company and, where available, certain members of senior management and board directors.
The company said it will continue to assess the carrying value of the acquired assets.
Aphria is now taking steps to correct those mistakes, including reviewing the board's composition to ensure that the majority of the board consists of independent directors, enforcing controls to assess and minimize risk to acquisitions, transactions and contracts, and adopting best practices to manage potential conflicts of interest including disclosure of all direct or indirect ownership interests.
“The constructive conclusion to this long process has strengthened the company," said Irwin D. Simon, Aphria’s independent board chair. "Though I was not part of Aphria at the time of the LATAM acquisition, the special committee findings give me and the board full confidence that it was executed at an acceptable value and is consistent with the company’s international growth strategy.”
“With this behind us, we are committed to fully focus on our bright future and creating value for all Aphria shareholders," added Simon. "Aphria is committed to the highest levels of governance and transparency, with a board that, upon the appointment of a permanent CEO, will be fully composed of independent directors."
Aphria also said the most recent Health Canada inspection concluded that the Leamington facility and operations are in compliance with the requirements of the Cannabis Act and the cannabis products cultivated from that facility are of the highest quality.
The company added that former CEO Vic Neufeld and Aphria co-founder Cole Cacciavillani will be retiring March 1, but will continue to be special advisors.
Simon is serving as interim CEO until the board identifies a permanent CEO.
John Cervini will also step down as a director on March 1.