Ontario’s Pot Rules Could Throw Retail Partnerships Into Disarray

(Bloomberg) -- Ontario is limiting pot producers’ retail exposure, issuing rules about store licenses that could throw several partnerships into disarray.

A company is not eligible for a cannabis retail license if it’s more than 9.9 percent owned or controlled by one or more licensed producers, the province said in rules issued this week.

This could thwart the ambitions of several retailers, including Canopy Growth Corp.’s wholly owned Tokyo Smoke, Alcanna Inc., which is 25 percent owned by Aurora Cannabis Inc., and National Access Cannabis Corp., which recently closed a financing that saw four licensed producers take a combined stake of 12 percent.

National Access Cannabis has a partnership with Second Cup Ltd., which said earlier this month that it has identified more than 20 Ontario locations that it hopes to convert into pot shops. Those plans may not be possible under the new regulations.

One partnership that appears to be unaffected is Cronos Group Inc.’s joint venture with California-based MedMen Enterprises Inc. The U.S. company isn’t licensed to produce in Canada and Cronos doesn’t hold a stake in the company, seemingly giving it a leg up on domestic producers.

Ontario will begin accepting applications for retail licenses on Dec. 17 and stores will begin opening on April 1, the province said Wednesday. Until then, the government-run Ontario Cannabis Store website is the only place where Ontarians can legally buy recreational pot.

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