Sundial Growers Inc. has agreed to make a stalking horse bid to acquire cannabis grower Zenabis Group, which obtained court protection from creditors last week.

The agreement will set a minimum acceptable bid for the Zenabis Group's business and assets.

Zenabis Group, a wholly owned subsidiary of cannabis company Hexo Corp., is restructuring under the Companies' Creditors Arrangement Act.

In December 2020, Sundial announced the acquisition of an investment which owned $58.9 million in Zenabis Group senior secured debt. The outstanding unpaid principal was $51.9 million as of June 16, 2022. 

The assets covered by the agreement Monday include an indoor growing facility in Atholville, N.B., with an annual production capacity of approximately 46,000 kilograms of dried cannabis and 15,000 kgs of extraction capacity. 

The agreement also includes a decommissioned indoor facility in Stellarton, N.S., that was used as a packaging, processing, and value-added cannabis product manufacturing facility.

"We are committed to creating continuity for the Zenabis Group's operations and employees and assisting Zenabis in good faith with its restructuring," Sundial CEO Zach George said in a statement.