Green Growth Brands Inc. (“Green Growth”) (CSE: GGB) reaffirms its
commitment to launch an offer (the “Offer”) to purchase all of the
issued and outstanding common shares of Aphria Inc.
(“
Aphria”) (TSX:
APHA and
NYSE:
APHA) which it does not already own and welcomes
early expressions of interest from Aphria shareholders who are
frustrated with Aphria’s performance and absence of compelling
future plans for the company.
“Since we announced our intention to launch the takeover of
Aphria we have seen two things. First, Aphria shareholders are
welcoming a 45%+ premium offer because they understand the
significant value that can be unleashed by our combined teams,
assets and geographies. Second, a real interest in the market to
understand Green Growth and our valuation,” said Peter Horvath, CEO
of Green Growth. “When investors consider our trailing revenue,
recent license wins in Nevada, and a buildout in the new market of
Massachusetts they agree that it is not a question of if Green
Growth reaches C$7.00 per share, but when. We understand that there
are some in the market who want to focus on destroying value at
Aphria, but we are committed to creating it.”
Why Green Growth and Aphria are the Right
Match
By acquiring Aphria, Green Growth represents a way for
shareholders of Aphria to participate in the much larger U.S.
market, with significantly greater long-term sales potential. The
combination of the two companies will create an unparalleled North
American player with operations on both sides of the border,
combining Aphria’s Canadian supply and wholesale agreements with
Green Growth’s vertically integrated operations including
cultivation, manufacturing and retail. The combination also marries
the talent of Aphria’s veterans in the greenhouse industry and
pharmaceutical operations with Green Growth’s team of retail
experts from well-known retailers including Designer Shoe Warehouse
Inc. and L Brands Inc. (Victoria’s Secret). Together the combined
company will be the largest U.S. operator by market capitalization
and the only North American cannabis operator.
Green Growth’s Record of Success and Why a C$7.00
Valuation Makes Sense
Green Growth has a strong track record of success, doing in
months what has taken other cannabis companies years to achieve.
Green Growth has a current fully-diluted1 market capitalization of
over C$1.1 billion.
Management believes that the additional value creation from
recent announcements and near-term business initiatives expected to
be executed shortly have not yet been reflected in its share price
and has confidence in a minimum C$7.00 per share valuation for the
following reasons:
- Green Growth has raised more than C$150 million in capital
since inception and, in late 2018, went public by way of a reverse
takeover. Today, Green Growth owns, operates and/or licenses two
premier retail cannabis stores under the banner “The+Source”2 as
well as a cultivation and processing facility, all of which are
located in Las Vegas, Nevada. The cultivation and processing
facility comprises 12,000 sq. ft. and has a potential annual
capacity of ~1,600 kg. Additionally, Green Growth, subject to
regulatory approval, has an irrevocable purchase agreement to
acquire a cultivation facility in Pahrump, Nevada. The Pahrump
facility will be producing product in the near future.
- Green Growth was recently awarded seven additional licenses in
Nevada for retail dispensaries, which, together with its current
operations and the Pahrump facility, are expected to generate total
revenue of ~C$275 million by 2020.
- Green Growth has a first-to-market cannabidiol (CBD)
business.
- Green Growth recently announced the acquisition of Just Healthy
LLC, which holds provisional certificates of registration for a
registered medical marijuana dispensary in Northampton,
Massachusetts, and a cultivation and processing site, also located
in Northampton. The license allows for up to three total medical
dispensaries. Just Healthy LLC is expected to generate an
incremental ~C$130 million in revenue by 2020.
- Green Growth has an extensive pipeline of value-creating
initiatives and strategic partnerships, including working with six
different large developers who represent a vast network of malls in
the U.S., to launch over 450 mall kiosks in prime locations.
Moreover, to illustrate confidence in the value of the C$7.00
consideration under the Offer, Green Growth expects to complete a
concurrent brokered financing of C$300 million at that same per
share price, with Green Growth insiders committing to backstop the
entire financing.
At a C$7.00 per share valuation, Green Growth would have a
fully-diluted3 total enterprise value of ~C$1.6 billion. Based
solely on Green Growth’s current Nevada operations, the Pahrump
facility, and Just Healthy LLC, Green Growth would trade at an
implied 12x TEV/2020E EBITDA, which is a discount of over 50% to
current large cannabis peer multiples. Furthermore, factoring in
the value creation from its near-term business initiatives expected
to be executed shortly (including mall kiosks, e-commerce, and
wholesale), Green Growth would trade materially below the 12x
TEV/2020E EBITDA.
Aphria shareholders will continue to maintain control of the pro
forma entity, with ~60% ownership. Green Growth shareholders will
have a ~34% ownership interest, with subscribers to the C$300
million financing holding a ~6% ownership interest.
Green Growth is Not a Related Party to
Aphria
To our knowledge, Aphria does not own any shares of Green
Growth, nor do any of Aphria’s directors sit on Green Growth’s
board. As those who participate in the small, yet growing, cannabis
industry know, there are many overlapping informal relationships
between participants. Any informal relationships that may exist are
separate from Green Growth’s business decisions and Green Growth
has no related party influence with Aphria, nor does Aphria have a
related party influence over Green Growth.
For further clarity, Aphria’s CEO, Vic Neufeld, who is listed as
one of many advisors to Green Acre Capital through its Green Acre
Opportunity Corp. fund has no influence over Green Growth. Green
Acre has invested in multiple cannabis entities and many are
considered competitors to Aphria. There is nothing noteworthy about
Green Acre investing in another up-and-coming cannabis entity,
regardless of overlap in a small, emerging industry.
The clearest evidence for lack of influence in Green Growth’s
acquisition of Aphria is the fact Aphria’s board has refused to
engage and rejected Green Growth’s premium offer thus making a
transaction much more difficult and expensive to achieve.
Misinformation from Self-Interested Market Participants
Does Not Change the Merits of the Premium Offer
Certain market participants have spread misinformation related
to Green Growth with the objective of destroying value in Aphria.
This misinformation was generated by comments from those with a
stated short position in Aphria and whose trade will be impeded by
Green Growth’s premium offer. Shareholders should be aware of the
facts related to a number of incorrect statements made.
Specifically:
- Green Growth has confirmed the Schottenstein family does not
own Aphria shares. The Schottensteins applied for a cultivation,
processing and dispensary license with an affiliate of Aphria,
Liberty Health Sciences, in the state of Ohio. The venture was
awarded a processing and dispensary provisional license in Ohio. At
such time that state law permits transfers, the JV will be
dissolved. Subsequent to making the application in Ohio, Aphria
divested its interest in Liberty Health Sciences.
- Shawn Dym is not a director on Green Growth’s board.
Green Growth Will Launch its Offer for
Aphria
Green Growth has been willing to work with Aphria’s board to
find ways to enhance value for shareholders of both companies.
Green Growth is confident in the certainty of a C$300 million
financing at C$7.00 per share. Over 10% of Aphria’s shareholders
have already indicated their support of the Offer. Aphria’s board
has two options: Engage with Green Growth as a serious buyer to
create real value or continue their endless analysis which will
result in the destruction of shareholder value.
We look forward to continued direct engagement with Aphria’s
shareholders as we work together to build the leading cannabis
company in the world.
Questions? Need more help? Aphria shareholders should contact
Kingsdale Advisors, the information agent and depositary for the
Offer, at 1-866-851-3214 (North American Toll-Free Number) or
+1-416-867-2272 (Outside North America) or via email
at contactus@kingsdaleadvisors.com.
Intention to Make an Offer
Full details of the Offer are expected to be set out in the
formal Offer and take-over bid circular which is expected to be
mailed to Aphria shareholders, a copy of which is expected to be
available at www.sedar.com under Aphria’s profile. Green Growth
expects to formally commence the Offer and mail the Offer and
take-over bid circular to Aphria shareholders in the coming
weeks.
Readers are cautioned that Green Growth may determine
not to make the Offer if (i) Aphria implements or attempts to
implement defensive tactics in relation to the Offer, (ii) Green
Growth uncovers or its contemplated funding sources uncover or
otherwise identify information suggesting that the business,
affairs, prospects or assets of Aphria have been impaired or
uncovers or otherwise identifies other undisclosed material adverse
information concerning Aphria or (iii) Aphria determines to engage
with Green Growth to negotiate the terms of a combination
transaction and Aphria and Green Growth determine to undertake that
transaction utilizing a structure other than a take-over bid such
as a plan of arrangement. Accordingly, there can be no assurance
that the Offer will be made or that the final terms of the Offer
will be as set out in this news release. In
addition, the contemplated consummation of a concurrent brokered
financing of C$300 million, at a price per share of C$7.00, and the
contemplated backstop commitment in that regard, are subject to a
variety of contingencies and conditions, including satisfactory
completion of customary due diligence as to both Aphria and Green
Growth, agreement on mutually agreeable definitive documentation,
and other customary undertakings and conditions. No binding
commitment of any kind has yet been made in this regard, and
readers should not assume any such commitment will be made unless
and until reflected in a binding instrument agreed by the
contemplated funding sources, which cannot and should not be
assumed or assured.
The Offer will be undertaken in accordance with National
Instrument 62-104 – Take-Over Bids and Issuer Bids and will be
subject to a number of customary conditions, including: (i) there
being deposited under the Offer, and not withdrawn, at least 66
2/3% of the outstanding Aphria Shares (calculated on a fully
diluted basis), excluding Aphria Shares held by Green Growth; (ii)
receipt of all governmental, regulatory, stock exchange and third
party approvals that Green Growth considers necessary or desirable
in connection with the Offer; (iii) there being no legal
prohibition against Green Growth making the Offer or taking up and
paying for the Aphria Shares; (iv) Aphria not having adopted or
implemented a shareholder rights plan, disposed of any assets,
incurred any material debts, implemented any changes in its capital
structure or otherwise implemented or attempted to implement a
defensive tactic; (v) no material adverse change having occurred in
the business, affairs, prospects or assets of Aphria; (v) Green
Growth not becoming aware of Aphria having made any untrue
statement of a material fact or omitting to state a material fact
that is required to be made to any securities regulatory authority;
(vi) approval by the shareholders of Green Growth in accordance
with the policies of the Canadian Securities Exchange; and (vii)
the statutory minimum condition that 50% of the Aphria Shares
having been tendered to the Offer, excluding Aphria Shares held by
or over which control is exercised by Green Growth (which cannot be
waived). If the Offer proceeds, Green Growth expects to call during
the first quarter of 2019 a meeting of its shareholders to consider
a resolution to approve the issuance of the Green Growth Shares in
connection with the Offer. Green Growth expects the Offer,
when made, will remain open for an acceptance period of at least
105 days from the date of mailing its take-over bid circular. It is
within the power of the Board of Directors of Aphria to
significantly shorten this minimum bid period, allowing
shareholders to receive the benefits of Green Growth’s offer in
only 35 days. Shareholders of the Company are encouraged to contact
Aphria and to urge management and the Board to allow Green Growth’s
takeover bid to proceed in the minimum time frame
allowed.
Advisors
Green Growth Brands has retained Canaccord Genuity as its
financial advisor, Norton Rose Fulbright Canada LLP as its legal
advisor, and Kingsdale Advisors as its strategic shareholder and
communications advisor and depositary.
About Green Growth Brands Green Growth brands
expects to dominate the cannabis and CBD market with a portfolio of
emotion-driven brands that people love. Led by renowned
retailer Peter Horvath, the GGB team is full of retail
renegades with decades of experience building successful brands.
Join the movement at GreenGrowthBrands.com.
Media Contact:Ian Robertson Executive
Vice President, Communication Strategy Kingsdale
Advisors Direct: 416-867-2333 Cell: 647-621-2646
Email: irobertson@kingsdaleadvisors.com
Investor Contact: Peter HorvathCEO, Green
Growth Brands Inc. Email: PHorvath@greengrowthbrands.com
Cautionary Statement in Forward-Looking
Information
This press release contains certain statements and information
which constitute “forward-looking information” within the meaning
of applicable securities laws. Wherever possible, forward-looking
information can be identified by the expressions "seeks",
"expects", "believes", "estimates", "will", “plans”, “may”,
“believes”, “anticipates,” "target" and similar expressions (or the
negative of such expressions). The forward-looking statements are
not historical facts, but reflect the current expectations of Green
Growth regarding future results or events and are based on
information currently available to it. The forward-looking events
and circumstances discussed in this release include, but are not
limited to, (i) the Offer, the terms of the Offer and the
anticipated timing of commencement of the Offer, (ii) the benefit
of the Offer to both Green Growth and the Company, including the
creation of wealth and value and the synergies that may be created
by the Offer, (iii) the C$300 financing, its timing and terms, (iv)
expectations regarding the ownership, management, operation and
size of Green Growth following completion of the Offer, (v) the
future strategy and plans of Green Growth, including following the
Offering, and (vi) the cannabis industry and regulatory
environment. Certain material factors and assumptions were applied
in providing this forward-looking information. All material
assumptions used in making forward-looking statements are based on
Green Growth’s knowledge of its business and the business of
Aphria, and, in some cases, information supplied by third parties,
including the public disclosure made by the Company. Certain
material factors or assumptions include, but are not limited to,
(i) the current business conditions and expectations of future
business conditions and trends affecting Green Growth and Aphria,
including the US and Canadian economy, the cannabis industry in
Canada, the US and elsewhere, and capital markets, and (ii) that
there have been no material changes in the business, affairs,
capital, prospects or assets of the Company, except as publicly
disclosed by the Company before the date hereof. All
forward-looking statements in this press release are qualified by
these cautionary statements. Green Growth believes that the
expectations reflected in forward-looking statements are based upon
reasonable assumptions; however, Green Growth can give no assurance
that the actual results or developments will be realized by certain
specified dates or at all. These forward-looking statements are
subject to a number of risks and uncertainties that could cause
actual results or events to vary materially from current
expectations. In addition to risks noted elsewhere in this news
release, material risks include, but are not limited to, (i) the
risk that the Offer will not be commenced or that the conditions to
the Offer will not be met, or met on a timely basis, or that the
transaction will not be consummated for any other reason, (ii)
changes in general economic conditions in Canada, the United States
and elsewhere, (iii) changes in operating conditions (including
changes in the regulatory environment) affecting the cannabis
industry, (iv) fluctuations in currency and interest rates,
availability materials and personnel, and (v) Green Growth’s
ability to successfully integrate the operations of Green Growth
and Aphria following completion of the Offer, including ability to
retain key Aphria personnel and renegotiate certain contracts to
obtain economies of scale or other synergies. Readers, therefore,
should not place undue reliance on any such forward-looking
information. Further, forward-looking information speaks only as of
the date on which such statement is made. Green Growth undertakes
no obligation to publicly update any such statement or to reflect
new information or the occurrence of future events or circumstances
except as required by securities laws. These forward-looking
statements are made as of the date of this press release.
Cautionary Statement Respecting the Proposed Offer
GREEN GROWTH HAS NOT YET COMMENCED THE OFFER NOTED ABOVE. UPON
COMMENCEMENT OF THE OFFER, GREEN GROWTH WILL DELIVER THE TAKE-OVER
BID CIRCULAR TO HOLDERS OF THE SHARES IN ACCORDANCE WITH APPLICABLE
CANADIAN SECURITIES LAWS AND WILL FILE A TAKE-OVER BID CIRCULAR
WITH THE SECURITIES COMMISSIONS IN EACH OF THE PROVINCES AND
TERRITORIES OF CANADA. THE TAKE-OVER BID CIRCULAR WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE OFFER AND SHOULD BE READ IN ITS
ENTIRETY BY APHRIA’S SHAREHOLDERS. AFTER THE OFFER IS COMMENCED,
APHRIA’S SHAREHOLDERS WILL BE ABLE TO OBTAIN, AT NO CHARGE, A COPY
OF THE TAKE-OVER BID CIRCULAR AND VARIOUS ASSOCIATED DOCUMENTS
UNDER APHRIA’S PROFILE ON THE SYSTEM FOR ELECTRONIC DOCUMENT
ANALYSIS AND RETRIEVAL (SEDAR) AT WWW.SEDAR.COM. THIS ANNOUNCEMENT
IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE OR FORM
PART OF ANY OFFER TO BUY OR INVITATION TO SELL, OTHERWISE ACQUIRE,
OR SUBSCRIBE FOR ANY SECURITY. THE OFFER WILL ONLY BE MADE PURSUANT
TO A FORMAL OFFER AND TAKE-OVER BID CIRCULAR. THE OFFER WILL NOT BE
MADE IN, NOR WILL DEPOSITS OF SECURITIES BE ACCEPTED FROM A PERSON
IN, ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE THEREOF
WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
HOWEVER, GREEN GROWTH MAY, IN ITS SOLE DISCRETION, TAKE SUCH ACTION
AS IT DEEMS NECESSARY TO EXTEND THE OFFER IN ANY SUCH
JURISDICTION.
Additional Information for U.S. Investors
This communication does not constitute an offer to buy or
solicitation of an offer to sell any securities. This communication
relates to a potential transaction with Aphria proposed by Green
Growth, which may become the subject of a registration statement
filed with the U.S. Securities and Exchange Commission (“SEC”).
This material is not a substitute for any prospectus or other
document Green Growth would file with the SEC regarding the
proposed transaction if a negotiated transaction is agreed between
Green Growth and Aphria or if the Offer is commenced or for any
other document that Green Growth may file with the SEC and send to
Aphria shareholders in connection with the proposed transaction. No
tender or exchange offer for the common shares of Aphria has
commenced at this time. In connection with the proposed
transaction, Green Growth may file Offer documents with the SEC,
including a registration statement. Any definitive Offer documents
will be mailed to shareholders of Aphria. U.S. INVESTORS AND
SECURITY HOLDERS OF APHRIA ARE URGED TO READ THESE AND OTHER
DOCUMENTS THAT MAY BE FILED WITH THE SEC CAREFULLY IN THEIR
ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to obtain free copies
of these documents (if and when available) and other documents
filed with the SEC by Green Growth through the web site maintained
by the SEC at http://www.sec.gov.
__________________________________
1 Treasury method.
2 Includes Henderson, where Green Growth has an irrevocable
option to acquire all of its membership interests.
3 Treasury method.
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