Mr. Narbe Alexandrian of Canopy River reports
RIV CAPITAL CLOSES PLAN OF ARRANGEMENT INVOLVING CANOPY GROWTH, PAVING WAY FOR ENTRY INTO U.S. MARKET
RIV Capital Inc. (formerly Canopy Rivers Inc.) has completed the previously announced plan of arrangement involving Canopy Growth Corp.
Pursuant to the arrangement, RIV Capital, through its wholly owned subsidiary, RIV Capital Corp. (RCC) (formerly Canopy Rivers Corp.), transferred its interests in Terrascend Corp., Terrascend Canada Inc., Les Serres Vert Cannabis Inc. (Vert Mirabel) (other than the shares transferred to Serres Bertrand as described below) and The Tweed Tree Lot Inc. to Canopy Growth in exchange for approximately $115-million in cash, 3,647,902 common shares of Canopy Growth (having a value of approximately $170.3-million as at the close of trading on the Toronto Stock Exchange on Feb. 22, 2021), and the cancellation of all 36,468,318 multiple voting shares (MVS) and 15,223,938 subordinate voting shares (SVS) of RIV Capital held by Canopy Growth.
Concurrent with the closing of the arrangement, and following the previously announced exercise by Les Serres Stephane Bertrand Inc. of its right of first refusal to purchase its proportionate interest in the common shares of Vert Mirabel (ROFR shares) from RIV Capital, the company also received a $3.4-million cash payment from Serres Bertrand for 117 ROFR shares, representing 11.7 per cent of the issued and outstanding common shares of Vert Mirabel.
The arrangement delivers immediate benefits to the company beyond the significant cash and share consideration it received from Canopy Growth. The value received by RIV Capital, after taking into account the cancellation of the MVS and SVS held by Canopy Growth, is accretive to minority shareholders. In addition, the arrangement eliminates the company's dual class share structure, which provides the company with enhanced strategic flexibility and a more attractive capital structure for the purposes of investments, acquisitions and capital raising.
"The closing of this transaction is a milestone for RIV Capital and our shareholders as we continue to pivot towards the prospering U.S. market," said Narbe Alexandrian, president and chief executive officer RIV Capital. "We believe that the evolving regulatory environment and market conditions make now an ideal time to enter the U.S., the most-attractive cannabis market in the world. Over the past several years, we have developed the strategic relationships and domain expertise needed to succeed in the U.S. With the substantial capital and strategic flexibility acquired in this deal, we believe that we are uniquely positioned to take advantage of the opportunities in the U.S. market and believe our strategic pivot will generate positive returns for our shareholders."
In the coming months, the company plans to pursue one or several material investment(s) in, or acquisition(s) of, United States-based cannabis companies. The U.S. market has developed at a year-over-year compound annual growth rate of 22 per cent since 2017 and is expected to grow to approximately $31.4-billion (U.S.) by 2024.
As legislators at both the state and federal levels eye legalization or other efforts at regulatory reform, the total addressable market for adult-use cannabis is expected to continue to grow at a material rate in the coming years. Accordingly, the company believes that there are a number of opportunities in both legal and soon-to-be-legal states to transact with operators that could benefit from RIV Capital's industry expertise, liquidity and public listing status. To the extent that such investments or acquisitions are inconsistent with the policies of the Toronto Stock Exchange, the company may initiate the process to delist from the TSX and list its securities on a stock exchange that does not prohibit such investments or acquisitions at such time.
Concurrent with completion of the arrangement, Canopy Growth's nominees on the company's board of directors resigned from the board. The company intends to replace the departing directors with new directors having skills and experience that complement those of the remaining directors, taking into account the company's new strategy and focus. As Canopy Growth is no longer the controlling shareholder, has no board representation and does not have any financial interests in RIV Capital, the company will now comprehensively re-evaluate its business and investment strategy and pursue previously unavailable opportunities. All existing governance agreements between Canopy Growth and the company have been terminated and, as a result, any adverse effects in the market resulting from a lack of clarity as to the company's overarching corporate strategy will be eliminated.
Early warning disclosure regarding Terrascend
Completion of the arrangement resulted in a 100-per-cent decrease in RIV Capital's interest in Terrascend and Terrascend Canada.
Immediately prior to the completion of the arrangement, RIV Capital beneficially owned (i) 19,445,285 exchangeable shares in the capital of Terrascend, (ii) warrants to purchase 2,225,714 common shares in the capital of Terrascend at an exercise price of $5.95 per share, (iii) warrants to purchase 333,723 common shares in the capital of Terrascend at an exercise price of $6.49 per share and (iv) a loan in the principal amount of approximately $13.2-million owed by Terrascend Canada to RCC.
Following the completion of the arrangement, RIV Capital no longer beneficially owns or exercises control over any of the Terrascend securities. While RIV Capital currently has no immediate plans or intentions with respect to the securities of Terrascend, depending on regulatory changes, market conditions, general economic and industry conditions, trading prices, Terrascend's business, financial conditions and prospects, and/or other relevant factors, RIV Capital may develop such plans or intentions in the future and, at such time, may, from time to time, acquire additional securities of Terrascend.
A copy of the early warning report filed by RIV Capital with respect to the Terrascend securities will be available under RIV Capital's profile on SEDAR or by contacting the company.
About Canopy Rivers Inc.
is an investment and acquisition company specializing in cannabis with a portfolio of 14 companies across various segments of the cannabis value chain. It believes that bringing together people, capital and ideas raises the potential of the entire cannabis industry. By leveraging its industry insights, in-house expertise and thesis-driven approach to investing, it aims to provide shareholders with exposure to specialized and disruptive cannabis companies.
We seek Safe Harbor.
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