Alliance One International (NYSE: AOI) has entered the U.S. Hemp Industry by making an investment into Criticality, a North Carolina based hemp processor. According to the latest 10-K, Alliance has acquired a 40% stake in Criticality with an option to increase to 50% after March 31, 2020. The filing showed an investment of $10mm, which, as reported by NCV, was likely the purchase price for the 40% stake.
Sources close to the deal reported hemp companies from Kentucky and Colorado were in the running for the investment, but Alliance One chose Criticality for undisclosed reasons. Criticality is one of ten registered processors in the North Carolina and the deal marks the first significant move by “Big Tobacco” to enter the U.S. hemp industry.
According to the Alliance One International 10-K filing:
The Criticality joint venture was formed to procure industrial hemp under the North Carolina Industrial Hemp Commission’s Pilot Program (the “Pilot Program”) and to extract cannabidiol (known as “CBD”), a non-psychoactive oil, for sale to consumers. In general, while hemp is classified as a controlled substance under U.S. federal law, pursuant to the Agricultural Act of 2014 (the “Farm Bill”) to the extent that industrial hemp is cultivated and processed as part of a state-supervised agricultural pilot program, it is exempt from regulation as a controlled substance.
The North Carolina Industrial Hemp Commission’s Pilot Program remains vibrant with strong leadership and support by North Carolina State University. The NC State extension office has launched a website listing upcoming events, news and information to help farmers and processors in the state.
According to a news release, Alliance One also purchased the two Canadian cultivation companies in January through its subsidiary, Canadian Cultivated Products. Island Garden, one of three licensed producers that will supply Prince Edward Island, with its growing facility in Charlottetown. The second company, Goldleaf Pharm, is currently applying to become a licensed medical marijuana cultivator in Ontario, Canada.
The acquisition of Island Garden is significant as the market on Prince Edward Island remains tightly held. While the Criticality deal represents the first large acquisition of a U.S. based hemp company, M&A activity has accelerated across Canada the last twelve months with Canadian LPs acquiring hemp companies to secure processing infrastructure and distribution channels. Hemp Business Journal will we be publishing more on these M&A deals in the upcoming CBD Report 2018.