There is a “window of time” for another company to acquire CannTrust Holdings Inc. (TRST.TO) before the beleaguered cannabis producer emerges as a potential election issue this fall, according to the former chairman and co-chief executive officer of Canopy Growth Corp.

“Someone is going to have to step in who is trusted with Health Canada, make the acquisition, solve the problem and get it put away before the election comes,” said Bruce Linton during an interview on BNN Bloomberg Friday. “There’s a window of time which is right now, should have been a week ago, that they do this. This is a big mess which could be [an election issue].”

Linton’s comments came the day after CannTrust announced that it fired CEO Peter Aceto with cause while its board forced chairman and co-founder Eric Paul to resign. The executive departures were announced less than three weeks after the company first disclosed it was found to be non-compliant with Health Canada regulations after an inspection uncovered thousands of kilograms of cannabis grown in unlicensed rooms at a facility located in Pelham, Ont.

Since CannTrust made its initial disclosure about running afoul of the regulator, the company’s board created a special committee tasked with investigating the scandal, while a growing pile of evidence showed Aceto and Paul were made aware of the illegal activity at one of CannTrust's facilities last year.

A prospective buyer will likely want to carve out potential liabilities that would come with purchasing CannTrust, according to Linton.

“Any company that’s going to buy them, if I was running that company, the last thing I’d want is the circus that comes with the acquisition of owning the shares,” Linton said. “You have 15 or 17 class action lawsuits, I would want to leave that mess over there and I would want to buy the assets at some price and leave someone else with that pile of problems.”

Canaccord Genuity analyst Derek Dley said in a note to clients late Thursday that while CannTrust’s assets may still have value, he doesn’t think the company will be acquired in the near-term “given the uncertainty surrounding the penalty expected to be levied by Health Canada.” Dley estimates the tangible value of CannTrust to be approximately $325.9 million, or about $2.34 per share, which includes cash, investments and any physical assets.

BNN Bloomberg reported on July 18 that at least two Canadian cannabis producers had been approached by bankers to gauge interest in acquiring CannTrust, while another reached out to Health Canada to inquire if the federal regulator would be amenable to a white knight scenario, according to multiple sources directly familiar with the matter.

Linton said he expects CannTrust to face significant penalties, and that the company’s licences to sell and process cannabis will likely be “parked” for a year until it becomes compliant with regulations again.

“It’s not like they were going five kilometres over the speed limit. They were going three times the speed limit,” he said. “And there are penalties if you want to go three times over the speed limit, you probably need to get your car taken away. This is not a minor infraction, this is a lot more than that.”

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