Cannabis products producer The Valens Company Inc. VLNS VLNCF has agreed to buy LYF Food Technologies Inc., a cannabis edibles producer, in a cash and share transaction for CA$24.9 million ($19.6 million).

The price tag will include an extra CA$17.5 million should LYF reach certain milestones.

Valens highlighted several strategic benefits coming from the LYF purchase, including a boost of the company’s EBITDA, improvements of its production capabilities for both 2.0 and 3.0 markets, growth potential via the addition of LYF’s product development and manufacturing platform, as well as the broadening of its product portfolio.

The company noted that edibles are projected to account for more than 10% of sales in the developed Canadian cannabis market.

"LYF has set the standard of what high quality edibles should be and has developed a diverse and flexible manufacturing platform to play a dominant role in the Canadian edibles market,” Valens CEO and chair Tyler Robson said.

LYF's product innovation and marketing teams, as well as its broad range of edible products, will introduce new formats to Canadian consumers that are typically available in more mature markets, Robson explained.

The purchase price includes CA$2.9 million in mortgage-related debt and the issuance of up to CA$22 million in shares of the company, of which CA$5 million to be paid in cash and the rest to be paid in shares

Around CA$2.2 million in shares — around 984,615 shares — will be put into escrow for so-called indemnity purposes. Up to CA$2.9 million in value of shares will be also put in escrow to be released once the specific financial milestones are met.