Mr. Raj Grover of High Tide reports
HIGH TIDE COMPLETES ACQUISITION OF META GROWTH
High Tide Inc. and Meta Growth Corp. have closed the previously announced merger between the two companies by way of a plan of arrangement.
Key transaction highlights:
With the closing of the arrangement, High Tide becomes the largest cannabis retailer in Canada based on 65 currently operating retail locations (1) and $148-million of annualized revenue (2).
High Tide is ranked No. 1 in Ontario based on nine currently operating corporate stores (following the completion of the arrangement) (3) and has two additional branded stores in the province. High Tide is also pleased to announce that Meta has recently received a retail store authorization for its corporately owned location at 698 Queen St. East in Toronto, which is situated in the trendy Riverside district. Anticipated to open on Nov. 20, 2020, this will increase High Tide's Ontario-related portfolio to 12 operating locations.
High Tide is also a leader in Alberta with 42 established stores following completion of the arrangement, and has a strong market presence in Manitoba and Saskatchewan.
High Tide and Meta have been collaboratively executing on the combined integration plan, which is expected to result in substantial annual cost and operational synergies -- approximately 60 per cent of which is expected to be realized almost immediately.
(1) As of the date hereof, the estimated ranking is based on High Tide's operating number of fully and jointly owned corporate locations and branded stores as compared with the same number disclosed by its publicly traded peers.
(2) Estimate is based on most recent interim financial statements of High Tide and Meta. On an annualized basis, the combined entity has gross profit of $56,718,844 and a gross margin of 38 per cent, each also based on the most recent interim financial statements of both companies.
(3) As of the date hereof, the estimated ranking is based on High Tide's operating number of fully and jointly owned corporate locations as compared with the same number disclosed by its publicly traded peers. High Tide currently has eight corporately owned stores, one jointly owned store and two branded stores in Ontario, as well as 12 locations in the AGCO's licensing queue.
Recent convertible debenture amendments and pro forma balance sheet
High Tide is pleased to announce that it has extended the maturity date of $1.25-million of its convertible debentures originally due in December, 2020, by 24 months in exchange for such debentureholders consenting to amend the conversion price of the debentures to 22 cents per common share of High Tide. Also, High Tide has extended the maturity date of $1-million of its convertible debentures originally due in June, 2021, on the same terms. These extensions provide further balance sheet flexibility for High Tide.
With a strong balance sheet of approximately $15-million in cash on a postclosing basis, the combined entity is well positioned to continue executing on its sustainable growth strategy and maintaining its leadership position in the Canadian cannabis retail sector.
"A decade of experience in the cannabis industry has led High Tide to this transformational achievement, as we begin a new era of growth by becoming Canada's largest cannabis retailer. We welcome our new employees, customers, shareholders and stakeholders into the next chapter of our story," said Raj Grover, president and chief executive officer of High Tide. "We have delivered significant growth, time and time again, both organically and by deploying our capital through strategic acquisitions to create immediate value for our shareholders. With over 700 employees, High Tide is contributing meaningfully to the growing strength of the cannabis industry in Canada, and will continue to do so through our expansion in the [United States] and abroad, where and when permissible under federal and local legislation. I am confident in our business strategy, and we are well positioned to deliver consistent milestones like this one into the future," added Mr. Grover.
Pursuant to the terms of the arrangement, holders of common shares of Meta received 0.824 High Tide share for each Meta share held. In total, High Tide acquired 237,941,274 Meta shares in exchange for 196,063,610 High Tide shares, resulting in former Meta shareholders holding approximately 45.0 per cent of the total number of issued and outstanding High Tide shares. Therefore, immediately after closing, there are currently 436,153,806 High Tide shares issued and outstanding.
Immediately prior to the closing of the arrangement, all directors and certain officers of Meta resigned, and Meta is now a wholly owned subsidiary of High Tide. Current High Tide board members Raj Grover, Nitin Kaushal and Arthur Kwan will be joined by Meta's nominees Christian Sinclair and Michael Cosic. Accordingly, Binyomin Posen and Nader Ben Aissa have resigned to accommodate Meta's nominees. As Meta's current chief financial officer, Mr. Cosic's appointment is expected to provide continuity to the combined entity by assisting with postclosing transition and integration matters.
It is anticipated that the Meta shares will be delisted from the TSX Venture Exchange as of the close of trading on Nov. 18, 2020, and Meta intends to submit an application to the applicable securities regulators to cease being a reporting issuer and terminate its public reporting obligations.
High Tide is expected to commence trading on the TSX-V on Nov. 19, 2020. As a result of the uplisting of High Tide shares on the TSX-V, it is anticipated that the High Tide shares will be delisted from the Canadian Securities Exchange as of the close of trading on Nov. 18, 2020.
Pursuant to the letter of transmittal mailed to shareholders of Meta as part of the materials in connection with the special meeting of shareholders of Meta held on Oct. 27, 2020, to receive the portion of the consideration to which they are entitled, registered holders of Meta shares are required to deposit their share certificate(s) representing Meta shares, together with a duly completed letter of transmittal, with TSX Trust Company, the depositary under the arrangement. Shareholders whose Meta shares are registered in the name of a broker, dealer, bank, trust company or other nominee must contact their nominee to deposit their Meta shares.
Listed Meta warrants and debentures
Prior to the completion of the arrangement, Meta had outstanding warrants and debentures that were, respectively, exercisable or convertible into Meta shares and were listed on the TSX-V:
META.WT: warrants exercisable at a price of 29 cents with an expiry date of Feb. 6, 2023, issued pursuant to a warrant indenture between Meta and TSX Trust dated Feb. 6, 2020;
META.DB: $21.15-million in secured convertible debentures convertible at a price of $1.08 with a maturity date of Nov. 30, 2021, issued pursuant to a debenture indenture between Meta and TSX Trust dated Nov. 23, 2018.
Following the completion of the arrangement, the listed warrants, with the exception of any listed warrants that have been exercised prior to closing of the arrangement, will become 40,076,412 warrants of High Tide, each exercisable for one High Tide share at a price of 35 cents per share until Feb. 6, 2023. The listed warrants will be listed for trading as warrants of High Tide on the TSX-V under the symbol HITI.WT on Nov. 19, 2020, and will remain listed on the TSX-V until the earliest to occur of their exercise, expiry or earlier delisting. The listed warrants will be delisted from trading as warrants of Meta as of the close of trading on Nov. 18, 2020.
The holders of listed debentures owning or exercising control over more than 66-2/3rds per cent of the outstanding principal amount of listed debentures have executed agreements providing for, among other things, a waiver of certain provisions of the debenture indenture insofar as the arrangement constitutes a change of control (as defined in the debenture indenture), and also consented to amend the conversion price of the listed debentures such that, following the arrangement, the conversion price is 22 cents per High Tide share. The holders also agreed to extend the maturity date of the listed debentures to Nov. 30, 2022.
Following the completion of the arrangement, the listed debentures, with the exception of any listed debentures that have been converted prior to closing of the arrangement, will remain debt obligations of Meta but will become convertible into High Tide shares. The listed debentures will be listed for trading as debentures of High Tide on the TSX-V under the symbol HITI.DB on Nov. 19, 2020, and will remain listed on the TSX-V until the earliest to occur of their conversion, expiry or earlier delisting. The listed debentures will be delisted from trading as debentures of Meta as of the close of trading on Nov. 18, 2020.
Pursuant to the terms of the arrangement agreement and as required by the warrant indenture and the debenture indenture, High Tide and Meta have entered into a supplemental warrant indenture and supplemental debenture indenture in respect of the warrant indenture governing the listed warrants and the debenture indenture governing the listed debentures, respectively. Copies of each of the supplemental indentures are available on High Tide's and Meta's respective SEDAR profiles.
Financial and legal advisers
ATB Capital Markets Inc. acted as financial adviser, and Garfinkle Biderman LLP acted as legal counsel to High Tide. Echelon Wealth Partners Inc. acted as financial adviser, and Borden Ladner Gervais LLP acted as legal counsel to Meta. Echelon Wealth Partners provided a fairness opinion to the board of directors of Meta.
About Meta Growth Corp.
Meta is a leader in secure, safe and responsible access to legal recreational cannabis in Canada. Through its Canada-wide network of Meta Cannabis Co., Meta Cannabis Supply Co. and NewLeaf Cannabis recreational cannabis retail stores, Meta enables the public to gain knowledgeable access to Canada's network of authorized licensed producers of cannabis. Meta is listed on the TSX Venture Exchange under the symbol META.
About High Tide Inc.
High Tide is a retail-focused cannabis company enhanced by the manufacturing and distribution of cannabis lifestyle accessories. Following completion of the arrangement, High Tide is the largest Canadian retailer of recreational cannabis as measured by revenue, with 65 current locations spanning Ontario, Alberta, Manitoba and Saskatchewan. Following completion of the arrangement, High Tide's retail segment features the Canna Cabana, KushBar, Meta Cannabis Co., Meta Cannabis Supply Co. and NewLeaf Cannabis banners, with additional locations under development across the country. High Tide has been serving cannabis consumers for over a decade through its numerous lifestyle accessory businesses, including e-commerce platforms Grasscity and CBDcity, and its wholesale distribution division under Valiant Distribution, including the licensed entertainment product manufacturer Famous Brandz. High Tide's strategy as a parent company is to extend and strengthen the company's integrated value chain, while providing a complete customer experience and maximizing shareholder value. Key industry investors in High Tide include Aphria Inc. and Aurora Cannabis Inc.
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