August 6, 2014 / 6:44 PM / 3 years ago

Canada's medical marijuana market heats up as public listings near

Dried and pruned marijuana buds wait to be processed for shipping at Tweed Marijuana Inc in Smith's Falls, Ontario, April 22, 2014. REUTERS/Blair Gable

TORONTO (Reuters) - Four Canadian medical marijuana producers are working on transactions that will allow them to go public in the next few weeks, according to industry sources and filings, giving investors fresh paths into a growing industry.

Mettrum Ltd, OrganiGram Inc, Bedrocan Canada Inc and PharmaCan Capital, a holding company involved with three licensed producers, will join Tweed Marijuana Inc TWD.V, now the only listed producer, on the TSX Venture Exchange (TSX-V).

Once these companies become public, investors will be able to directly or indirectly own shares in seven, including the three associated with PharmaCan, of the 13 medical marijuana producers licensed by Health Canada.

Tweed went public via a reverse takeover of a listed company in April and has a market value of C$101 million ($92.7 million).

Its rivals are involved in similar deals, which give fledgling companies seeking access to public markets the ability to list via shell companies already listed on an exchange.

Several medical marijuana firms are listed on the less actively regulated over-the-counter market in the United States.

But the nationwide regulations governing medical marijuana in Canada distinguish it from the U.S. market, where marijuana is illegal at the federal level, and are making the nascent sector attractive to both Canadian and foreign investors.

Producers report robust demand from patients as well as rising interest from fund managers and venture capital firms. Further, signs of early consolidation have emerged, with Tweed acquiring a greenhouse facility in Ontario and PharmaCan buying licensed producer In The Zone Produce Ltd.

Bedrocan Canada, which has received conditional approval for its listing from the TSX Venture Exchange, is expected to be the first of this crop to go public.

The partner of Dutch medical marijuana producer Bedrocan BV is currently valued at about C$57 million based on its most recent round of financing, two sources close to the company said. It is building a 52,000-square-foot marijuana growing facility in Ontario that will begin production by year-end.

Its rival, Toronto-based Mettrum, is expected to be valued at about C$80 million when it lists in about a month, according to two sources familiar with the matter.

Jacob Securities, Jordan Capital Markets, PowerOne Capital Markets, Cormark Securities, Dundee Securities and M Partners are some of the investment banks leading these offerings.

While most producers are based in Ontario and British Columbia, New Brunswick-based OrganiGram is trying to establish itself as the first organic producer and is focused on Eastern Canada.

“There’s tremendous appetite from investors on both sides of the border,” OrganiGram Chief Executive Denis Arsenault said. “U.S. funds are trying to get into the space as they see Canada as a more regulated, investment-ready locale.”

OrganiGram is valued at about C$35 million based on a recent financing. Arsenault expects OrganiGram to be listed on the TSX-V in the next few weeks.

In the past few months, more U.S. and Canadian institutional investors have started to warm up to the market, once seen as risky, unproven and lacking credibility.

“Canada is an attractive jurisdiction for sophisticated institutional capital seeking safe exposure to the growing medical marijuana industry,” said Paul Rosen, CEO of PharmaCan.

PharmaCan was most recently valued at about C$50 million and is also likely to go public soon.

Licensed producers MedReleaf Corp, Tilray, CanniMed and Delta 9 Bio-Tech Inc have told Reuters in recent months that they are not looking to go public.

In a separate development, U.S. authorities on Tuesday charged four stock promoters with civil fraud for manipulating the securities of marijuana-related and other microcap companies.

With reporting by Euan Rocha in Toronto; Editing by Peter Galloway

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