Sundial enters into an agreement in connection
with its secured credit investment to add low-cost indoor
cultivation from an EU GMP certified facility enabling
international market access
CALGARY, AB, June 20, 2022 /PRNewswire/ - Sundial Growers Inc.
(Nasdaq: SNDL) ("Sundial" or the "Company") announced
today that, in the context of the initial order pursuant to the
Companies' Creditors Arrangement Act (Canada) ("CCAA") pertaining to the
Zenabis Group (as defined below) rendered on June 17, 2022, it entered into a purchase
agreement, in the form of a "stalking horse bid" (the "Bid
Agreement"), pursuant to which the shares of Zenabis Global
Inc. and the business and assets of its direct and indirectly
wholly-owned subsidiaries (collectively, the "Zenabis
Group") would be acquired by Sundial. The Bid Agreement is
subject to the approval by the Québec Superior Court supervising
the CCAA Proceedings, and to potential alternative bids pursuant to
bidding procedures that will follow. All amounts are denominated in
Canadian dollars unless otherwise noted. Subject to the Court's
approval of the Bid Agreement and of bidding procedures that will
be sought on July 5, 2022, the Bid
Agreement will set the floor, or minimum acceptable bid, in a sale
and investment solicitation process, which is designed to achieve
the highest and best offer for the Zenabis Group's business and
assets and is under the supervision of Ernst & Young, acting as
CCAA Monitor.
The assets covered by the Bid Agreement include the 380,000
square foot indoor growing facility located in Atholville, New Brunswick with an annual
production capacity of approximately 46,000 kgs of dried cannabis
and 15,000 kgs of extraction capacity. The facility received EU GMP
certification, providing a license to the facility to export
internationally to Israel,
Malta, the United Kingdom, and the EU. Zenabis Group also
has a joint venture agreement with ZenPharm Limited, based in
Malta, allowing for commercial
bulk imports into Malta from the
facility in Atholville and
subsequent exports of finished medicinal cannabis products to
countries of the EU and United Kingdom. The Bid Agreement
also provides for the acquisition of a decommissioned 255,000 sq.
ft. indoor facility in Stellarton, Nova
Scotia, that was used as a packaging, processing, and
value-added cannabis product manufacturing facility.
Based on HEXO Corp.'s ("HEXO") publicly filed financial
statements and MD&A, contribution from the Zenabis Group to
consolidated net revenue was $11.1
million in the second fiscal quarter of 2022. HEXO's
international net revenues increased by 36% to $8.2 million in the second fiscal quarter of 2022
and by 312% relative to the prior year. Zenabis Group's
international net revenues consisted of 54% of HEXO's overall
international net revenues, increasing by 91% in the second fiscal
quarter of 2022 when compared to the prior quarter.
More than 100 employees currently work at the Atholville facility, and Sundial's assessment
is that the total capital invested in both the Atholville and Stellarton facilities to date is approximately
$108 million. The Atholville facility utilizes state-of-the-art
technology, including a fully computerized monitoring system, the
latest HPS and LED lighting technology and seed-to-sale tracking
systems, and grows several different strains with an extensive
library of strains currently under trial which would further
enhance Sundial's existing and expanding portfolio.
History of the
Investment
In December 2020, Sundial
announced the acquisition of a special purpose vehicle (the
"Investment") which owned $58.9
million of aggregate principal amount of senior secured debt
(the "Senior Loan") of Zenabis Group. On June 1, 2021, HEXO announced it had acquired all
the issued and outstanding common shares of Zenabis Global Inc. The
Senior Loan remained outstanding following the acquisition by HEXO
and bears interest at a rate of 14% per annum in addition to
monitoring fees and royalties based on quarterly sales revenue. As
at June 16, 2022 the outstanding
unpaid principal balance is $51.9
million.
Commenting on the Bid Agreement, Sundial's CEO Zach George said, "We are committed to creating
continuity for the Zenabis Group's operations and employees and
assisting Zenabis in good faith with its restructuring. This
process has just begun, and we will provide more information as it
becomes available."
About Sundial Growers
Inc.
Sundial is a public company whose shares are traded on Nasdaq
under the symbol "SNDL." Its business is reported and analyzed
under four segments: Cannabis Production and Cultivation, Cannabis
Retail, Liquor Retail, and Investments.
As a licensed producer that crafts small-batch cannabis using
state-of-the-art indoor facilities, Sundial's 'craft-at-scale'
modular growing approach, award-winning genetics, and experienced
growers set us apart. Sundial's brand portfolio includes Top Leaf,
Sundial Cannabis, Palmetto, Spiritleaf Selects and Grasslands.
Sundial is the largest private sector cannabis and liquor retailer
in Canada. The Company's retail
banners include Spiritleaf, Value Buds, Wine and Beyond, Liquor
Depot, and Ace Liquor.
Sundial's investment portfolio seeks to deploy strategic capital
through direct and indirect investments and partnerships throughout
the global cannabis industry.
For more information on Sundial, please go to
www.sndlgroup.com.
Looking-Forward Statement
This news release includes statements containing certain
"forward-looking information" within the meaning of applicable
securities law ("forward-looking statements"). Forward looking
statements in this release includes, but is not limited to, annual
production and the potential expansion plans of the Company in
Canada and internationally, the
Company's ability to provide uninterrupted supply to its customer,
and statements regarding the future performance of the Company.
Forward-looking statements are frequently characterized by words
such as "plan", "continue", "expect", "project", "intend",
"believe", "anticipate", "estimate", "may", "will", "potential",
"proposed" and other similar words, or statements that certain
events or conditions "may" or "will" occur. These statements are
only predictions. Various assumptions were used in drawing the
conclusions or making the projections contained in the
forward-looking statements throughout this news release.
Forward-looking statements are based on the opinions and estimates
of management at the date the statements are made, and are subject
to a variety of risks and uncertainties and other factors that
could cause actual events or results to differ materially from
those projected in the forward-looking statements. The Company is
under no obligation, and expressly disclaims any intention or
obligation, to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as expressly required by applicable law.
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SOURCE Sundial Growers Inc.