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CannTrust CEO told staff continue on unlicensed pot

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CannTrust Holdings Inc. (TRST.TO)  CEO Peter  Aceto told senior company officials to “continue as planned” and plant cannabis in an unlicensed room in mid-November, according to internal company documents obtained by BNN Bloomberg that establish a clear timeline of when illegal production was brought to management’s knowledge.

In minutes from weekly production meetings held by conference call from Nov. 14 to Nov. 28, seven CannTrust employees – including three vice-presidents as well as Graham Lee, the company’s director of quality and compliance – provided updates on developments at RG9, one of five unlicensed rooms at the company’s facility in Pelham, Ont. where Health Canada inspectors later determined the company grew thousands of kilograms of cannabis.

During a meeting held on Nov. 14, senior CannTrust staff stated that RG9 was not licensed by Health Canada and that further work in the room “needs up (sic) be run up the chain before anything is planted in there.” The room was estimated to be 50,000 square feet, roughly the same size as a football field, the minutes showed.

As well, Aceto – who was not present for any of the three production meetings – was to be informed by Lee that the RG9 room was not licensed, and that any repercussions if the company started planting in that room despite being unlicensed were “unknown.”

CannTrust CEO

That meeting also detailed how employee morale “seems to be unaffected” by corporate changes that led to the departure of president Brad Rogers as well as Michael Ravensdale, CannTrust’s former head of production, and that construction of additional rooms at the Pelham, Ont. facility was moving as planned.

“Doing what we can to make sure that deadlines are met and that [we are] holding people accountable,” the minutes showed.

On Nov. 21, the minutes stated that RG9 remained unlicensed but Lee – who attended each of the production meetings – stated he spoke to Aceto about the unlicensed room and was instructed to “continue as planned.”

Minutes from the Nov. 28 production meeting stated CannTrust employees had submitted an application to Health Canada for the RG9 licence and were still waiting for approval from the federal regulator. “Still moving forward with planting today – 3 lots,” the minutes stated. One lot is approximately 1,000 cannabis plants, which can produce as much as 1,000 kilograms of marijuana.

CannTrust CEO

A spokesperson for CannTrust declined to directly address BNN Bloomberg’s questions about the documents.

BNN Bloomberg obtained minutes from those three production meetings shortly after the head of CannTrust’s special committee said it was in the “final stages” of an investigation into how the company ran afoul of Health Canada regulations following an inspection last month that uncovered thousands of kilograms of cannabis grown in several unlicensed rooms at its Pelham, Ont.-based facility between last October and March.

CannTrust’s special committee was prompted to issue that statement after a report late Tuesday by The Globe and Mail alleged top executives at the Vaughan, Ont.-based pot firm were informed via email on Nov. 16 that cannabis was cultivated in unlicensed rooms.

“The Independent Special Committee of the Board of Directors of CannTrust is in the final stages of a thorough investigation of these matters as part of our due diligence requirements,” said Robert Marcovitch, chairman of CannTrust’s special committee investigating the situation, in an emailed response to The Globe’s report.

“We expect to conclude this investigation within days and will take all appropriate actions immediately thereafter.”

In a phone interview with BNN Bloomberg on July 16, Aceto deferred when asked specifically whether he knew about the cannabis grown in unlicensed rooms, stating that his focus was to bring CannTrust back into compliance with the federal regulator.

“The focus is on getting this business back in compliance, getting in the right place with Health Canada so we can continue to drive this business forward. That’s what a CEO is supposed to do and that’s what I’m focused on,” Aceto told BNN Bloomberg at the time.

Aceto and CannTrust Chairman Eric Paul did not immediately respond to BNN Bloomberg’s requests for comment Wednesday.

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Hudson’s Bay Company agrees to taken company private

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Hudson’s Bay Co. will go private in a deal valuing the Canadian retailer at $1.9 billion in a bid by a group of investors led by executive chairman Richard Baker to try their hand at reinvigorating the fading 349-year-old department-store chain.


Hudson Bay Company executive chairman Richard Baker

The board of Hudson’s Bay said it entered into an agreement with investors led by Baker after the group raised its offer price to $10.30 a share, up from $9.45 a share. It approved the offer after a recommendation by a committee of independent directors.

Hudson’s Bay shares rose 7 per cent to $10.11 at 9:35 a.m. in Toronto.

Attention will now turn to minority shareholders who came out against Baker’s earlier proposal. The company needs a majority of them to approve the new deal for it to go through.

Catalyst Capital Group and other investors had said Baker’s original offer undervalued a company that’s rich in real estate holdings. Representatives for Catalyst and for Jonathan Litt, an activist investor who’s also been critical of Baker, were not immediately available for comment.

“The special committee is confident that this transaction represents the best path forward for HBC and the minority shareholders,” David Leith, head of the special committee, said in a statement.

Baker and his investment group want full control of the retailer, which also owns Sak’s Fifth Avenue, to turn the business around outside the glare of public markets. While Saks has been the group’s bright star of late, the Canada-based Hudson’s Bay chain, the oldest company in North America, is removing 300 “unproductive” brands and bringing in another 100 in a turnaround effort.


Mannequins sit on display inside a Saks Fifth Avenue.

Daniel Acker/Bloomberg News

A number of traditional retailers are struggling and closing stores as consumer preferences change and shoppers increasingly migrate online to competitors like Amazon.com Inc.

Department stores in particular have struggled to attract new consumers and maintain sales.

Luxury focused chains haven’t been exempt from the fallout: Barneys New York Inc. filed for bankruptcy protection in August amid rising rent costs and a decline in visitors. A consortium led by Authentic Brands Group LLC has been selected as its initial bidder, with the group planning to open Barneys shops inside Saks Fifth Avenue stores owned by Hudson’s Bay, Bloomberg reported on Oct. 16, citing people with knowledge of the matter.

Hudson’s Bay has been trying everything to lower debt and stop its stock’s slide, most recently selling selling the operations of its Lord & Taylor department store chain to clothing rental subscription company Le Tote.

Chief executive Helena Foulkes, who was brought in last year, also sold flash-sale e-commerce site Gilt and cashed out of European operations.

The stock traded as high as $10.72 in August on expectations the bid would be raised. It was back at $9.45, the original offer price, at the end of last week. Over the last five years, the stock has lost about half of its value.

“It’s good to see that there’s a resolution with a good, formal take-private offer and a cash bid, and I think that should be a good resolution for a lot of people,” Greg Taylor, chief investment officer at Purpose Investments, said on BNN Bloomberg.

“Certainly a lot of people would have wanted a lot more from this but in the current dynamics around department stores in North America, I think this is probably as good as they could have hoped.”

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Energy regulator says crude-by-rail shipments fell to 310000 bpd

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The Canada Energy Regulator says exports of crude oil by rail from Canada fell slightly in August to 310,000 barrels per day from 313,000 bpd in July.

The August number is up 35 per cent from 230,000 bpd reported in August of 2018 but still well below the record high of 354,000 bpd set last December.

The small change in crude-by-rail shipments came despite a threat by Imperial Oil Ltd. CEO Rich Kruger to throttle back the company’s rail movements in August and September to protest the ongoing Alberta oil production curtailment program.

He says the program damages the economic case for crude-by-rail by artificially lowering the difference in oil prices between Alberta and the end market on the U.S. Gulf Coast.

Imperial reported moving 80,000 bpd by rail in June. It co-owns an oil shipping rail terminal at Edmonton with capacity to load 210,000 barrels of crude per day.

Alberta has gradually eased the curtailment program designed to better align production with tight pipeline capacity from an initial withholding of about 325,000 bpd last January to 125,000 bpd in September.

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Hudson Bay Company agrees to pay more to shareholders for takeover bid

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Hudson Bay Company

The board of Hudson Bay Co. has agreed to a sweetened offer by a shareholder group led by executive chairman Richard Baker.

The retailer says the group has agreed to pay $10.30 per share in cash to take HBC private. The bid is up from an earlier offer of $9.45 per share.

The agreement values HBC at about $1.9 billion.

HBC says the price offered represents a premium of 62 per cent compared with where its shares were trading before the shareholder group’s initial privatization proposal in the summer.

The Baker-led group holds a 57 per cent stake in the retailer and includes Rhone Capital, WeWork Property Advisors, Hanover Investments (Luxembourg) and Abrams Capital Management.

The deal is subject to the approval by a majority of the minority of HBC shareholders, excluding the shareholder group and its affiliates, and approval by a 75 per cent majority vote at a special meeting of shareholders.

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