Mr. Peter Horvath of Xanthic reports
GREEN GROWTH BRANDS ANNOUNCES INTENTION TO LAUNCH TAKEOVER BID FOR APHRIA INC.
Xanthic Biopharma Inc., doing business as Green Growth Brands Ltd., currently intends to make an offer to purchase all of the issued and outstanding common shares of Aphria Inc. which it does not already own.
The offer will provide Aphria shareholders with 1.5714 common shares of Green Growth for each Aphria share and represents premiums of 45.5 per cent over Aphria's closing price on the Toronto Stock Exchange on Dec. 24, 2018, and 46.0 per cent over Aphria's volume-weighted average price on the TSX for the last 10 trading days ended Dec. 24, 2018. The offer values Aphria at approximately $2.8-billion ($2.1-billion (U.S.)) based on a valuation of $7 per share for Green Growth shares.
"We believe our offer will create value for both Aphria and Green Growth shareholders. We are confident that the significant premium we are offering and the opportunity to participate in the growth of a stronger, combined company are so compelling that we are taking our offer directly to Aphria's shareholders. Together, we can unleash synergies between our teams, assets and geographies, forming a combined enterprise that will accelerate our collective growth strategies in Canada, the [United States] and overseas," said Peter Horvath, chief executive officer of Green Growth.
Green Growth expects to complete a concurrent brokered financing of $300-million at a price per share of $7, to both illustrate confidence in the value of the consideration under the offer and to finance the business growth of the combined entity. Green Growth expects that certain of its existing shareholders will commit to backstop the $300-million financing concurrently with the execution of a business combination agreement with Aphria or the take-up of shares under the anticipated offer.
Prior to announcing its intention to take the offer directly to shareholders, Green Growth engaged Aphria's board to attempt to negotiate a friendly business combination that included, among other things, a very short exclusivity period to allow both parties to seriously consider the combination; a full go-shop provision in favour of Aphria; and the preservation of Aphria's management and commitment to board representation at the combined company. Aphria's shareholders should be aware that Green Growth offered that upon a friendly business combination with support from Aphria's board, Green Growth would invest $50-million in equity at an Aphria per-share value of $11.
Why a combined Green Growth and Aphria is better for shareholders
Combining Aphria with Green Growth is the fastest way to create significant value for shareholders of both companies. The combined entity ...
Creates an unparalleled North American player with Canadian and U.S. operations. Aphria has a large footprint in Canada and supply agreements with all provinces and the Yukon territory and strong strategic partnerships establishing wholesale supply agreements
Green Growth operates vertically integrated cannabis operations, including cultivation, manufacturing and retail assets in Nevada, including recently being awarded seven retail cannabis dispensary licences. Together, the pro forma company will have a strong foundation, extensive retail relationships and infrastructure to capture significant future growth as international markets evolve.
Increases scale and footprint, and creates the pre-eminent U.S. consolidator. The combined company will be the largest U.S. operator by market capitalization and the only North American cannabis operator
Combines Aphria's cultivation and production capacity with Green Growth's retail strength
The combined company will marry Aphria's low-cost cultivation and near-term production capacity with Green Growth's vast retail know-how to capture market share while maintaining lean margins. Aphria's current cash cost per gram is $1.30 and is expected to further decrease to 95 cents per gram with projected annual capacity of over 250,000 kilograms by early 2019 (Aphria first quarter 2019 investor presentation dated Oct. 11, 2018). Green Growth's strong management team has a proven record of delivering at the retail level and is already operating a best-in-class dispensary in Las Vegas.
Poised to benefit from transformational cannabis-related regulatory changes in the world's largest cannabis market
Green Growth will soon be rolling out a consumer-focused line of CBD (cannabidiol) products, initially focused on topicals and balms, and is well positioned to benefit from further pro-cannabis U.S. regulation in the near to medium term.
Unites best-in-class management teams: Aphria's pharmaceutical and greenhouse operational experience and Green Growth's proven retail expertise
Aphria's team is composed of veterans in the greenhouse industry and proven operators of large pharmaceutical companies. Green Growth's chief executive officer held senior positions at a number of retailers, including Designer Shoe Warehouse Inc. and L Brands Inc. (Victoria's Secret). Additionally, Green Growth's largest shareholder, the Schottenstein family, has deep relationships in the retail sector.
Benefits to Aphria shareholders
While Aphria shareholders may be discouraged by recent events and having seen their investment significantly impacted, they should be aware of the immediate benefits of the offer and reasons to tender:
- Significant and immediate 45.5-per-cent premium to market price;
- Meaningful ownership position in a combined entity that is poised for further growth;
- Potential for further downward share price impact if the offer is not accepted.
Green Growth believes it already has support for the offer from Aphria shareholders holding approximately 10 per cent of the outstanding Aphria shares. Green Growth has additionally acquired a meaningful toehold position in Aphria.
It is expected that following the offering, Green Growth will continue to be listed on the Canadian Securities Exchange under the symbol GGB.
Questions? Need more help? Aphria shareholders should contact Kingsdale Advisors, the information agent and depositary for the offer, at 1-866-851-3214 (North American toll-free number) or 1-416-867-2272 (outside North America) or by e-mail at
Intention to make an offer
Full details of the offer are expected to be set out in the formal offer and takeover bid circular, which is expected to be mailed to Aphria shareholders, a copy of which is expected to be available at
under Aphria's profile. Green Growth expects to formally commence the offer and mail the offer and takeover bid circular to Aphria shareholders over the coming weeks.
Readers are cautioned that Green Growth may determine not to make the offer if: (i) Aphria implements or attempts to implement defensive tactics in relation to the offer, (ii) Green Growth uncovers or its contemplated financing sources uncover or otherwise identify information suggesting that the business, affairs, prospects or assets of Aphria have been impaired or uncovers or otherwise identifies other undisclosed material adverse information concerning Aphria, or (iii) Aphria determines to engage with Green Growth to negotiate the terms of a combination transaction, and Aphria and Green Growth determine to undertake that transaction utilizing a structure other than a takeover bid such as a plan of arrangement. Accordingly, there can be no assurance that the offer will be made or that the final terms of the offer will be as set out in this news release.
In addition, the contemplated consummation of a concurrent brokered financing of $300-million, at a price per share of $7, and the contemplated backstop commitment in that regard are subject to a variety of contingencies and conditions, including satisfactory completion of customary due diligence as to both Aphria and Green Growth, agreement on mutually agreeable definitive documentation, and other customary undertakings and conditions. No binding commitment of any kind has yet been made in this regard, and readers should not assume any such commitment will be made unless and until reflected in a binding instrument agreed by the contemplated financing sources, which cannot and should not be assumed or assured.
The offer will be undertaken in accordance with National Instrument 62-104 (Take-Over Bids and Issuer Bids) and will be subject to a number of customary conditions, including: (i) there being deposited under the offer, and not withdrawn, at least 66-2/3rds per cent of the outstanding Aphria shares (calculated on a fully diluted basis), excluding Aphria shares held by Green Growth; (ii) receipt of all governmental, regulatory, stock exchange and third party approvals that Green Growth considers necessary or desirable in connection with the offer; (iii) there being no legal prohibition against Green Growth making the offer or taking up and paying for the Aphria shares; (iv) Aphria not having adopted or implemented a shareholder rights plan, disposed of any assets, incurred any material debts, implemented any changes in its capital structure, or otherwise implemented or attempted to implement a defensive tactic; (v) no material adverse change having occurred in the business, affairs, prospects or assets of Aphria; (v) Green Growth not becoming aware of Aphria having made any untrue statement of a material fact or omitting to state a material fact that is required to be made to any securities regulatory authority; (vi) approval by the shareholders of Green Growth in accordance with the policies of the Canadian Securities Exchange; and (vii) the statutory minimum condition that 50 per cent of the Aphria shares having been tendered to the offer, excluding Aphria shares held by or over which control is exercised by Green Growth (which cannot be waived). If the offer proceeds, Green Growth expects to call during the first quarter of 2019 a meeting of its shareholders to consider a resolution to approve the issuance of the Green Growth shares in connection with the offer. Green Growth expects the offer, when made, will remain open for an acceptance period of at least 105 days from the date of mailing its takeover bid circular. It is within the power of the board of directors of Aphria to significantly shorten this minimum bid period, allowing shareholders to receive the benefits of Green Growth's offer in only 35 days. Shareholders of the company are encouraged to contact Aphria and to urge management and the board to allow Green Growth's takeover bid to proceed in the minimum time frame allowed.
Green Growth Brands has retained Canaccord Genuity as its financial adviser, Norton Rose Fulbright Canada LLP as its legal adviser, and Kingsdale Advisors as its strategic shareholder and communications adviser and depositary.
About Xanthic Biopharma Inc., doing business as Green Growth Brands Ltd.
Green Growth brands expects to dominate the cannabis and CBD market with a portfolio of emotion-driven brands that people love. Led by renowned retailer Peter Horvath, the GGB team is full of retail renegades with decades of experience building successful brands.
Green Growth has not yet commenced the offer noted above. Upon commencement of the offer, Green Growth will deliver the takeover bid circular to holders of the shares in accordance with applicable Canadian securities laws and will file a takeover bid circular with the securities commissions in each of the provinces and territories of Canada. The takeover bid circular will contain important information about the offer and should be read in its entirety by Aphria's shareholders. After the offer is commenced, Aphria's shareholders will be able to obtain, at no charge, a copy of the takeover bid circular and various associated documents under Aphria's profile on the SEDAR. This announcement is for informational purposes only and does not constitute or form part of any offer to buy or invitation to sell, otherwise acquire or subscribe for any security. The offer will only be made pursuant to a formal offer and takeover bid circular. The offer will not be made in, nor will deposits of securities be accepted from a person in, any jurisdiction in which the making or acceptance thereof would not be in compliance with the laws of such jurisdiction. However, Green Growth may, in its sole discretion, take such action as it deems necessary to extend the offer in any such jurisdiction.
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