Aphria Inc. (TSX:APHA), one of the Canadian marijuana stocks, said its shareholders should hang tight before considering the takeover offer from Green Growth Brands
SmallCapPower | January 25, 2019: Aphria Inc. (TSX:APHA) (NYSE:APHA), one of the Canadian cannabis stocks, made a statement after Green Growth Brands Inc. (CSE:GGB) on January 22, 2019, formally commenced an unsolicited takeover bid to acquire all outstanding common shares of Aphria, other than the common shares of the Company owned by GGB or its affiliates, in exchange for 1.5714 common shares of Green Growth Brands. At the time of the initial offer, the proposal valued Aphria at C$11 per share.
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Aphria has advised its shareholders to take no action on the Offer until a formal recommendation is made by Aphria’s Board of Directors. Aphria’s directors will take counsel from its advisors before making a formal recommendation to Aphria’s Board of Directors, post which shareholders will be notified through a news release and Directors’ Circular in accordance with applicable securities laws.
Green Growth Brands made its intentions known after the markets closed on December 27. At the time, GGB stock price was $4.98. As of January 24, 2019, shares of Green Growth Brands were trading at $5.80. GGB had noted that it values its stock at $7 a share based on a $300 million equity financing it plans to complete.
Aphria would seemingly benefit by being acquired since it is the fifth-largest Canadian marijuana producer by market cap in Canada, if you include U.S.-listed Tilray. Yet despite being among the lowest-cost producers ($1.30 per gram), Aphria lacks a strong retail presence. This makes the Company desirable, especially by a larger retail player in the United States.
Aphria Inc’s independent Board Chair Irwin Simon stated, “Aphria is a market leader and has a tremendous opportunity to create substantial value for shareholders. Any offer would necessarily need to be evaluated against the current and future value of our current strategic plan. We are also determined to protect Aphria shareholders from opportunistic offers that fail to reflect the substantial value and growth prospects we have built at Aphria. We will evaluate GGB’s offer in this spirit. There are many considerations that will factor into the Board’s recommendation and we look forward to providing our response to shareholders in due course. In the interim, shareholders should take no action as it relates to the GGB offer.”
Aphria is a leading global cannabis company with a presence in more than 10 countries across five continents. Its stock trades at a market capitalization of C$2.3 billion with a price-to-book multiple of 1.3x. Green Growth Brands’ offer expires on May 9, 2019.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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