Aegis Brands is passing ownership of its cannabis stores to Kiaro Holdings in order to focus its growth strategy on food service.

Aegis has agreed to sell its Hemisphere Cannabis banner in exchange for what will be a roughly 25% stake in Kiaro once the transaction closes and certain commercial milestones are met, making Aegis the cannabis company’s largest individual shareholder.

Vancouver-based Kiaro operates two cannabis storefronts in Saskwatchewan and five in British Columbia, with a sixth set to open in the near future. Hemisphere currently operates five storefronts, with two more set to open soon, in the highly sought-after Ontario market. In May, Kiaro also announced plans to acquire Cozy Cannabis, along with its Toronto location. By the end of Q1 2022, Kiaro is expected to operate 18 storefronts in Canada.

Formed by a restructuring that was completed last year, Aegis Brands was created as a parent company for coffee chain Second Cup that could also pursue new growth opportunities, such as higher-end coffee chain Bridgehead, as well as the cannabis category through Hemisphere, which created its initial retail footprint from former Second Cup locations.

At the beginning of 2020, Aegis sold Second Cup, a move the company said at the time would allow it to focus more on the development of the Bridgehead and Hemisphere brands, as well find new acquisition opportunities.

But in today’s announcement, Steven Pelton, president and CEO of Aegis Brands, said scaling was important to success in the rapidly changing cannabis category. Giving ownership to a company like Kiaro, with “aggressive growth plans,” would allow it to build a retailer capable of achieving “substantially increased revenues” in the cannabis category, and in which Aegis has a substantial stake.

Aegis also said the transaction would allow it to continue to invest in Bridgehead and new acquisitions, with a focus on entrepreneurs and companies with high growth potential, which is how Pelton descriped Kiaro and CEO Daniel Petrov. But Pelton added that Aegis is currently focused on aligning “with similarly brilliant restaurateurs to grow and succeed in the food service hospitality space.”

As part of the transaction, Jen Juby, VP of perations at Hemisphere, will move over to Kiaro as VP of retail, with duties including integrating Hemisphere stores into the Kiaro network and continuing to implement its retail experience.

The deal is expected to close in mid-September.