Sale of Assets Transforms Scythian Into a Highly
Liquid and Well Capitalized Company with Over $200 million in
Cash and Marketable Securities on Hand
Scythian Biosciences Corp. (the "
Company" or
“
Scythian”) (TSXV:SCYB) (Frankfurt:9SB) (OTC –
Nasdaq Intl:SCCYF) is pleased to announce that it has entered into
a strategic deal with Aphria Inc. (TSX:APH)
(“
Aphria”), a leading global cannabis company, for
Aphria to acquire Scythian’s Latin American and Caribbean assets.
It is expected that the Company’s strategic relationship with
Aphria will provide leverage for early stage investments in
emerging international markets.
Pursuant to a definitive share purchase
agreement (the “Agreement”), Aphria will acquire
100% of the issued and outstanding common shares of LATAM Holdings
Inc., a direct, wholly-owned subsidiary of Scythian, which
following the closing of previously announced transactions will own
licenses and other assets held through subsidiaries in Argentina,
Colombia and Jamaica (the “Transaction”).
As a result of the Transaction, Aphria will
indirectly acquire the following interests:
- 100% of Marigold Acquisitions Inc.,
an entity which owns 100% of Hampstead Holdings Ltd., a Bermuda
incorporated entity, which owns 49% of Marigold Projects Jamaica
Limited, which has received licenses to cultivate and conditional
licenses to process, sell and provide therapeutic or spa services
using cannabis products in Jamaica;
- 100% of ABP, S.A., an Argentinean
pharmaceutical import and distribution company, currently licensed
for the importation of CBD oil; and
- 90% of Colcanna S.A.S., a Colombian
medical cannabis producer, currently licensed for cultivation and
importation of CBD, extraction, production, research and
exportation of medical cannabis products,
(collectively, the “Target
Corporations”).
Scythian will also grant Aphria a right to
purchase from Scythian, in one or more separate tranches, up to 90%
of the issued and outstanding common shares of an entity in Brazil
(which Scythian is currently seeking to acquire) at terms to be
agreed upon.
Aphria will issue CAD $193 million in shares to
Scythian and assume USD $1 million in aggregate liabilities of the
Target Corporations owing to Scythian (the
“Consideration”) resulting in Scythian having well
over $ 200 million in cash and marketable securities on hand. The
substantial liquidity provided by the Transaction will enable
additional potential transactions that underpin Scythian's
strategic transformation towards enhancing its global cannabis
foundation.
Equipped with a vast network of expert cannabis
cultivators and industrial-scale production facilities, Aphria is
uniquely qualified to build upon the solid framework and impactful
leadership that Scythian has established in the Latin American and
Caribbean markets. Aphria has perfected its ability to grow safe,
pharma-grade, flower to scale that enable the bringing of top
cannabis products to researchers and patients across the globe.
Aphria’s strong foundation is coupled with a
drive to achieve sustainable long-term international growth that
balances patient economics with expansion efforts. As Scythian
continues to enter untapped medical cannabis markets and
successfully establish its presence abroad, Aphria’s commercial
greenhouse capabilities and pharmaceutical quality standards will
grow emerging markets to meet the growing global demand for
research-backed cannabis treatments.
“Scythian's early stage strategic investments in
some of the world’s leading markets outside of Canada have fast
tracked our positioning and reputation as a global cannabis
leader,” said Scythian CEO Rob Reid. “It therefore feels fitting to
exit our Latin American and Caribbean assets to one of the world’s
leading operators. This timely strategic move allows Aphria to
leverage Scythian’s first mover progress in the region while
expanding on their own global reach and scope.”
Additional Transaction
Details
Scythian’s board of directors (the
“Board”) has, after receiving legal and financial
advice, unanimously approved the Transaction. In so doing, it
unanimously determined that the entering into of the Agreement is
in the best interests of Scythian. The Board also unanimously
determined to recommend that shareholders of Scythian (other than
Aphria and its affiliates) vote their common shares in favour of
the Transaction.
The Board was advised on the Transaction by
Clarus Securities Inc. and has received an opinion from them that
the Consideration payable to Scythian pursuant to the Transaction
is fair, from a financial point of view, to Scythian. The Board has
also received a formal valuation prepared in accordance with the
requirements under Multilateral Instrument 61-101 - Protection of
Minority Security Holders in Special Transactions (“MI
61-101”) for related party transactions (as Aphria is a
related party of Scythian) and a fairness opinion from Haywood
Securities Inc. indicating that the fair market value of the issued
and outstanding common shares of LATAM Holdings Inc. is in the
range of CAD $180 million to CAD $200 million and that the
Consideration payable to Scythian pursuant to the Transaction is
fair, from a financial point of view, to Scythian.
Scythian will hold a special meeting of
shareholders no later than September 15, 2018 to consider the
Transaction. In order for the Transaction to proceed, it must be
approved by not less than a simple majority of the votes cast by
shareholders at the meeting and a simple majority of the votes cast
by shareholders at the meeting excluding for this purpose votes
attached to common shares held by persons described in items (a)
through (d) of section 8.1(2) of MI 61-101 (i.e. majority of the
minority approval).
Certain directors, officers and shareholders of
Scythian, collectively holding approximately 40% of Scythian’s
common shares, have entered into support and voting agreements
pursuant to which they intend to vote all of their common shares in
favour of the Transaction and against any resolution submitted by
any other shareholder that is inconsistent therewith. These are
irrevocable hard lock-ups (i.e. they cannot be terminated in the
event of a superior proposal).
The Transaction is subject to a number of other
closing conditions, including the closing by Scythian of the
previously announced transactions to acquire interests in the
Target Corporations, entry by Scythian into a three-year
non-competition and confidentiality agreement with Aphria in
respect of Argentina, Colombia and Jamaica, the entry into
employment and/or consulting agreements by certain employees and
consultants of the Target Corporations, and various regulatory and
stock exchange approvals. The Agreement also provides for, among
other things, a non-solicitation covenant on the part of Scythian,
as well as a “fiduciary out” provision that entitles Scythian to
consider and accept a superior proposal, and a right in favour of
Aphria to match any superior proposal. If the Agreement is
terminated in certain circumstances, including if Scythian enters
into a definitive agreement with respect to a superior proposal,
Aphria is entitled to a break-fee payment of $5.8 million. A copy
of the Agreement will be available under Scythian’s profile on
SEDAR at www.sedar.com.
Further information regarding the Transaction
will be included in an information circular to be mailed to
Scythian shareholders in due course and in Scythian’s material
change report in respect of the announcement of the Transaction,
each of which will be filed with the Canadian securities regulators
and will be available on SEDAR. The Transaction is expected to
close on or prior to September 30, 2018 or such later date as
provided in the Agreement.
Financial and Legal
Advisors
Gowling WLG (Canada) LLP acted as legal counsel
to Scythian. Haywood Securities Inc. provided a fairness
opinion and a valuation under MI 61-101 and Clarus Securities Inc.
acted as financial advisor to the Board of Directors of Scythian
and provided a fairness opinion.
Stikeman Elliott LLP acted as legal counsel to
Aphria. Cormark Securities Inc. is providing a fairness opinion and
acted as financial advisor to the Board of Directors of Aphria.
About Aphria
Aphria is a leading global cannabis company
driven by an unrelenting commitment to our people, product quality
and innovation. Headquartered in Leamington, Ontario – the
greenhouse capital of Canada – Aphria has been setting the standard
for the low-cost production of safe, clean and pure
pharmaceutical-grade cannabis at scale, grown in the most natural
conditions possible. Focusing on untapped opportunities and backed
by the latest technologies, Aphria is committed to bringing
breakthrough innovation to the global cannabis market. The
Company’s portfolio of brands is grounded in expertly-researched
consumer insights designed to meet the needs of every consumer
segment. Rooted in the founders’ multi-generational expertise in
commercial agriculture, Aphria drives sustainable long-term
shareholder value through a diversified approach to innovation,
strategic partnerships and global expansion, with a presence in
more than 10 countries across 5 continents.
About Scythian Biosciences
Corp.
Scythian is an international cannabis company
with a focus on the world’s leading markets outside of Canada. Its
fast tracked growth has come through a number of strategic
investments and regional partnerships in cultivation, distribution
and branded products across Europe, United States, South America
and the Caribbean. These significant endeavors complement the
company’s R&D partnerships with some of the world’s leading
universities. It is this comprehensive approach that is positioning
Scythian as a future global frontrunner in the medical cannabis
industry.
Neither TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
CONTACT INFORMATION
Scythian Biosciences Corp.Rob Reid, CEOPhone:
(212) 729-9208Email: info@scythianbio.com
For media inquiries, please contact:David Schull
or Nic JohnsonRusso Partners(858)
717-2310david.schull@russopartnersllc.com
nic.johnson@russopartnersllc.com
Cautionary Statements
This press release contains certain
forward-looking information and statements
(“forward-looking information”) within the meaning
of applicable Canadian securities legislation, that are not based
on historical fact, including without limitation, statements
containing the words "believes", "anticipates", "plans", "intends",
"will", "should", "expects", "continue", "estimate", "forecasts"
and other similar expressions. Such forward-looking information
includes information relating to the terms and conditions of the
proposed Transaction, that the strategic relationship with Aphria
will further the Company’s early stage investments in emerging
international markets, the impact of the Transaction on the
Company’s balance sheet and marketable assets; the Company’s aim to
use its increased liquidity to pursue additional transactions to
support the Company’s transformation into a global cannabis
enterprise; the Company continuing to explore medical cannabis
markets abroad; Aphria’s ability to meet the demand for medical
cannabis products in emerging markets; and the special meeting of
the Company’s shareholders to consider the Transaction.
In developing the forward-looking information,
the Company has assumed, among other things, that the cultivation,
distribution and use of medical cannabis products will continue to
become legal in a growing number of international jurisdictions,
that the global market demand for medical cannabis products will
continue to grow and that Aphria remains and will remain a leader
in cultivating and distributing pharmaceutical grade cannabis
products in Canada and other markets.
Readers are cautioned to not place undue
reliance on forward-looking information. Forward-looking
information is subject to a number of risks and uncertainties that
may cause actual results or events to differ materially from those
contemplated in the forward-looking information, and even if such
actual results or events are realized or substantially realized,
there can be no assurance that they will have the expected
consequences to, or effects on the Company. Such risks and
uncertainties include, among other things: that a regulatory
approval that may be required for the Transaction is not obtained
or is obtained subject to conditions that are not anticipated
including the applicable stock exchange approvals; that the Company
is unable to complete the acquisition of the Target Corporations or
to do so on a timely basis; and that the Company fails to obtain
the necessary shareholder approval in accordance with applicable
securities laws.
Although the Company has attempted to identify
important factors that could cause actual results or events to
differ materially from those contained in the forward-looking
information, there can be other factors that cause results or
events to not be as anticipated, estimated or intended, including,
but not limited to: the Company’s ability to comply with all
applicable governmental regulations in a highly regulated business;
investing in target companies or projects which have limited or no
operating history and are engaged in activities currently
considered illegal under US federal laws; changes in laws; limited
operating history; competition; reliance on management;
requirements for additional financing; inconsistent public opinion
and perception regarding the medical-use and adult-use marijuana
industry and; regulatory or political change. Additional risk
factors can also be found in the Company’s annual information form
filed on SEDAR and available at www.sedar.com.
The forward-looking information contained in
this press release are expressly qualified by this cautionary
statement and are made as of the date hereof. The Company disclaims
any intention and has no obligation or responsibility, except as
required by law, to update or revise any forward-looking
information, whether as a result of new information, future events
or otherwise.