Aphria Agrees To Accelerate Expiry Of Green Growth Brands Bid And Terminate Its Option With GA Opportunities Corp

CANADA: Aphria announced that it has entered into a series of transactions that will accelerate the expiry date to April 25, 2019 for the previously announced take-over bid by Green Growth Brands Inc. and will terminate the arrangements with GA Opportunities Corp. for consideration of $89.0 million.
 
Irwin D. Simon, Aphria’s Chairman and Interim Chief Executive Officer stated, “We are very pleased to move forward with this favorable resolution as we continue to focus on the long-term growth of our leading cannabis business. We plan to use the $89.0 million in proceeds from the transaction to fund our strategic global expansion initiatives. On behalf of our Board of Directors and management team, we continue to recommend that Aphria shareholders reject the GGB offer and do not tender their Aphria shares to the GGB offer.”
 
Aphria has entered into a shortened deposit period agreement with GGB to facilitate the acceleration of the expiry of GGB’s offer to purchase all of the issued and outstanding shares of Aphria. In that regard, Aphria has agreed to reduce the initial deposit period of the bid to 92 days from January 23, 2019, the date that GGB commenced the GGB Offer. GGB will be mailing a Notice of Variation providing that the GGB Offer will expire at 5:00 p.m. on April 25, 2019. Based on the closing price of $3.86 per GGB share on the Canadian Securities Exchange on April 12, 2019, the implied consideration under the GGB Offer would be $6.07 per Aphria share, representing a significant 54.7% discount to Aphria’s closing price on the Toronto Stock Exchange of $13.41 per share on the same day.
 
In light of the foregoing and for the reasons previously disclosed, Aphria continues to recommend that Aphria shareholders reject the GGB Offer and do not tender their Aphria shares to the GGB Offer. 
 
In connection with the foregoing, GGB has entered into a share purchase agreement with GAOC pursuant to which GGB has agreed to purchase for cancellation 27.3 million shares held by GAOC, for an aggregate purchase price of $89.0 million. The terms of the Share Purchase Agreement include, among other things, that GGB will pay in cash $50.0 million of the Purchase Price to GAOC within 30 days of the date hereof and will issue a promissory note to GAOC for $39.0 million due in six months from the Closing Date. GGB has granted a security interest to GAOC to secure its obligations under the Share Purchase Agreement and the GGB Note. The completion of the Share Repurchase is conditional on the Purchase Price, on a per share basis, not being greater than the simple average of the closing price of the GGB shares on the CSE for the 20 trading days prior to the Closing Date.
 
Aphria and GAOC have also entered into a debt/call option settlement agreement pursuant to which Aphria has agreed to settle the debt owed under a promissory note issued by GAOC to Aphria in the amount of $55.0 million and terminate its rights under a related call option in consideration for total consideration of $89.0 million payable by GAOC upon the receipt of funds received under the Share Purchase Agreement and the GGB Note. GAOC has granted a security interest to Aphria to secure its obligations under the Settlement Agreement.

Green Growth Brands Partners With Simon Property Group To Launch America’s First Chain Of CBD Shops

OHIO: Green Growth Brands announced that it has entered into an agreement through which the Company will gain access to 108 prime shop locations in U.S. malls owned and operated by the Simon Property Group.  Pursuant to the arrangement, GGB will further expand its chain of CBD-infused personal care product shops under the Seventh Sense Botanical Therapy brand and other GGB brands. The Seventh Sense brand offers high quality CBD-infused products at affordable prices.

“Our partnership with Simon allows GGB to launch our brands and CBD products in premier shopping destinations across the U.S.,” said Peter Horvath, CEO of GGB. “Our management team has had decades of experience working closely with developers and operating premium retail stores in their properties. We know this arrangement gives us access to the best locations, foot traffic, and consumers. We look forward to introducing our remarkable retail experience and line of CBD products to Simon shoppers in the near future.”

Simon is the largest shopping mall operator in the United States, and its high-profile properties include Roosevelt Field in metro New York; The Galleria in Houston, TX; and Woodbury Common Premium Outlets in Central Valley, NY. The expansive nature of the relationship with Simon makes it the first of its kind in the CBD industry and will give GGB access to entire markets of new customers at many of the nation’s most productive retail locations.

“We are constantly on the lookout for cutting-edge new concepts, like the GGB shops,” said John Rulli, President of Simon Malls. “We are committed to adding new and dynamic retailers and uses to our shopping destinations, and the GGB shopping experience is exactly the type of innovation our customers want and expect from us. We’re excited to work on the GGB launch, and look forward to a long and deepening relationship as we build this network together.”

The first shop is expected to open in March, 2019 at Castleton Square Mall in Indianapolis, Indiana. The remaining shops will be opened over the course of 2019.

Aphria’s Board of Directors Rejects Green Growth Brand’s Hostile Takeover Bid As Significantly Undervalued And Inadequate

CANADA: Aphria announced that its Board of Directors has rejected the hostile bid by Green Growth Brands to acquire all of the outstanding common shares of the Company including any Common Shares that may become issued and outstanding after January 22, 2019, but prior to the expiry of the hostile bid upon the exercise, conversion or exchange of options, warrants, debentures or other securities of the Company exercisable or convertible into Common Shares, other than Common Shares owned by GGB or its affiliates, in exchange for 1.5714 shares of GGB.

aphria logoBased on the 20-day volume-weighted average price of GGB shares immediately before GGB’s announcement of an intention to acquire the Common Shares of the Company, the Hostile Bid reflects a 23% discount to the Company’s share price over the same period. The Board made its recommendation after careful consideration and receipt of the recommendation of a committee of its independent directors (the “Independent Committee”), who were advised by financial and legal advisors.

In the Board’s view, the Hostile Bid:

  • Significantly undervalues Aphria relative to its current and future worth, offering Aphria shareholders a substantial discount to its current and future value as opposed to a premium observed in other transactions in the cannabis sector involving Canadian licensed producers.
  • Would have negative repercussions, including delisting from the TSX and NYSE and a potential reduction in interest from strategic partners, that could destroy value for Aphria shareholders, with minimal offsetting operational, financial or strategic benefits.
  • Would result in Aphria shareholders effectively giving GGB shareholders a 36% interest in Aphria in exchange for shares in a company with limited operations or other experience in the cannabis industry.
  • Does not account for Aphria’s bright outlook, either as an independent company or in partnership with a strategic partner, which offers Aphria shareholders substantial value creation.

Aphria Responds To Unsolicited Proposal By Green Growth Brands

CANADA: Aphria responds to the unsolicited proposal by Xanthic Biopharma d.b.a. Green Growth Brands to acquire all of the Company’s outstanding common shares in an all-stock transaction.

Based on the 20-day volume weighted average price of GGB shares and the expressed exchange ratio of 1.5714 common shares of GGB for each Aphria share, the proposed bid would be approximately 23% below the Company’s average share price over the same period.  Aphria shareholders should be aware that the value of GGB‘s per-share offer is based on a hypothetical valuation of its own shares, with no relation to the current price.

GGB’s management presented the offer to Aphria the morning of December 27, 2018, and immediately went public with its proposal, less than six hours later and after the market closed on the same day.  The Board believes that GGB is attempting to acquire the company through a highly conditional offer at a significant discount to its current and future value.

Irwin Simon, Chair, said, “While we appreciate GGB’s interest in the value we have created at Aphria and our significant growth prospects, their proposal falls short of rewarding our shareholders for participating in such a transaction.  Further, the proposed offer is quite risky given GGB’s condition to complete a brokered financing at a price that is more than double the recent average of their share price, as a key term to the proposal.”

Added Simon, “The Board has determined that the GGB proposal, as it currently stands, significantly undervalues the company.  Aphria has a tremendous market opportunity as a leader in the sector and a strategic vision to meet those opportunities.  Our focus is to realize that value for the benefit of all our shareholders.”

The Aphria Board of Directors has established an independent committee of directors to consider this proposal and any formal offer received.  As previously disclosed, Aphria holds a passive investment in Green Acre Capital Fund II, which we understand has invested in numerous emerging cannabis companies, including GGB.  The independent committee is comprised of directors with no relationship to Green Acre Capital Fund II or GGB.  Aphria will continue on the execution of its current corporate strategy, including its international expansion plan, and the growth of its unique assets.