Aphria Inc. (TSX:APH) announced recently plans to acquire cannabis companies in Colombia, Argentina, and Jamaica
SmallCapPower | July 20, 2018: Aphria Inc. (TSX:APH) Tuesday announced that it is set to expand into Latin America and the Caribbean with the planned acquisition of companies in Colombia, Argentina, Jamaica and a right of first offer and refusal in respect of Brazil via a definitive share purchase agreement with Scythian Biosciences Inc. Also, Aphria will acquire 100% of the issued and outstanding common shares of LATAM Holdings Inc. – a direct, wholly-owned subsidiary of Scythian.
For Our Complete Coverage Of Canadian Marijuana Stocks Click Here
Watch: Cannex Capital Holdings (CSE:CNNX) Wants to Emerge as a Multi-State U.S. Player, Says CEO
Aphria CEO Vic Neufeld remarked, “Aphria is proud with this initiative to create a true leader in medical cannabis across LATAM and extend our leadership in the global industry. We have spent a considerable amount of time and resources evaluating opportunities in Latin America and the Caribbean and we are confident in the long-term strategic opportunity and the value it will bring to our shareholders. The Transaction, once completed, will firmly place Aphria at the center of the medical cannabis industry in the region, and will provide the strong foundation, relationships and infrastructure to capture significant future growth as more LATAM and Caribbean markets evolve. We truly have the best international team in the business, and we are continuing to bring our industry-leading expertise, experience and know-how to strategic international markets.”
The Company will acquire all of the issued and outstanding common shares (on a fully-diluted basis) of LATAM Holdings with licenses and other rights and assets held through various subsidiaries in Argentina, Colombia and Jamaica, together with the rights in Brazil, for a total transaction consideration of $193 million and assumption of $1 million in existing debt. The remainder of the transaction consideration will be in the form of common shares of Aphria at $12.31 deemed share price. Furthermore, the Company intends to issue 15,678,310 shares to Scythian pertaining to the transaction, which will represent ~6.3% of currently issued and outstanding shares of Aphria, calculated on a non-diluted basis.
Aphria will acquire the following entities through LATAM Holdings:
- 90% of Colcanna S.A.S, a Colombian medical cannabis producer, currently holding a CBD cultivation license from the Ministry of Justice and holding a license for processing, extraction, production and research for the local market and export for the international market of cannabis derivatives, from the Ministry of Health. Colcanna expects to receive its THC license from the Ministry of Justice within the next month;
- 100% of ABP S.A., an Argentinean pharmaceutical import and distribution company, currently licensed for the importation of CBD oil for the purposes of research and development;
- 100% of Marigold Acquisitions Inc., a BC incorporated entity, which owns 100% of Hampstead Holdings Ltd., a Bermuda incorporated entity, which owns 49% of Marigold Projects Jamaica Limited, which has received a license to cultivate and conditional licenses to process, sell and provide therapeutic or spa services using cannabis products; and,
- Rights to purchase 50.1% of a Brazilian incorporated entity, which Scythian is currently seeking to acquire, which is expected to hold a medical cannabis cultivation, processing and distribution license in Brazil, upon receipt of a license, for US$24 million, and an additional right of first refusal to acquire an additional 20-39% of the same entity at fair market value at the time.
The agreement between Aphria and Scythian has a provision of a non-solicitation covenant on part of Scythian as well as a ‘fiduciary out’ clause that enables Scythian to consider and accept a superior proposal, and a right in favour of Aphria to match any superior proposal. In case the agreement doesn’t fructify – if Scythian enters into an agreement with superior proposal – Aphria will get break-fee payment of $5.8 million. The deal is expected to close by September 30, 2018.
Aphria currently trades at a market capitalization of $2.61 billion with price-to-book multiple of 2.72x. Through this transaction, Aphria medical brands will get exposure to more than 300 million people, roughly nine times the size of Canada. The Company’s stock climbed ~8% on the TSX to close at $11.25 on Wednesday.
Disclosure: Neither the author nor his family own shares in the company mentioned above.
To read our full disclosure, please click on the button below:
