Delta 9 Cannabis (OTCMKTS:VRNDF) has agreed to sell its 50% stake in the Delta West extraction facility to Westleaf (OTCMKTS:WSLFF).

Under the agreement, Westleaf will issue 5,600,000 common shares in consideration for the acquisition of Delta 9’s 50% stake in the project. The transaction is expected to close occur on or about January 31.

“This move will allow us to streamline our allocation of capital and allow Delta 9 to focus on continued expansion of our Winnipeg based cultivation facilities, continued expansion of our Delta 9 Cannabis Stores unit, and allow us to explore other strategic investments in the industry,” Delta 9 CEO John Arbuthnot said in a statement.

Under the agreement, Westleaf will purchase Delta 9’s 50% stake in the Delta West Limited Partnership which owns the Delta West extraction facility.

The purchase price is payable by way of the issuance of 5,600,000 Westleaf shares which, based on the closing price on the TSX Venture Exchange of $2.67 per share on January 25, represents approximately $14.95 million.

As part of the deal, Delta 9 will enter into a voluntary escrow agreement that, in addition to the four month restricted period required by law, will restrict the transfer of the Westleaf shares issuable under the agreement.

The deal is subject to certain conditions and the receipt of all required regulatory and third party approvals, including the approval of the TSXV.

Delta West Facility

The Delta West facility is approximately 60,000 square feet with Phase I to include R&D, processing, extraction, manufacturing and order fulfillment, all built to EU GMP specifications with the intent to access international export markets.

Phase II of the facility is designed to produce new derivative product lines in preparation of Health Canada’s legalization of derivative products, expected to occur on October 17.

The Delta West facility is scheduled to open in the summer of 2019.