Alcanna Inc. (the “
Company” or
“
Alcanna”) (TSX: CLIQ) is pleased to announce that
it has entered into an arrangement agreement (the
“
Agreement”) with Sundial Growers Inc.
(“
Sundial”) (NASDAQ: SNDL) pursuant to which
Sundial will acquire all of the issued and outstanding common
shares of Alcanna for $9.12 per share for fully diluted
consideration of approximately $346 million (the
“
Transaction”).
Under the terms of the Agreement, Alcanna
shareholders will receive, for each Alcanna common share held,
10.69 Sundial common shares (the “Exchange Ratio”)
(based on the volume weighted average price
(“VWAP”) of Sundial common shares on the Nasdaq
for the 10-day period ending October 6, 2021 and converted to
Canadian dollars). Upon closing, existing Alcanna shareholders will
own approximately 16% of the outstanding Sundial common shares.
“This transaction represents immediate value
creation for our shareholders as well as a meaningful ownership
position in a large and rapidly growing diversified company,” said
James Burns, Vice Chair and Chief Executive Officer of Alcanna.
“Having reviewed various strategic alternatives for Alcanna over
the past 18 months, I am confident that the transaction with
Sundial offers the best alternative for Alcanna.”
“We are excited to welcome Alcanna into the
Sundial organization,” said Zach George, Chief Executive Officer of
Sundial. “Alcanna’s stable and growing cash flow profile and best
in class retail operations expertise will further accelerate our
retail growth strategy and also allow us to focus more management
effort on our rapidly expanding investment arm.”
KEY TRANSACTION HIGHLIGHTS
- Immediate shareholder value
creation from attractive premium
- 39% premium to Alcanna’s 10-day VWAP on the date of signing the
letter of intent (“LOI”) (September 1, 2021)
- Crystallization of
significant longer term value creation
- $9.12 per Alcanna share represents a 104% increase from one
year ago (based on the Alcanna closing price of $4.48 on the TSX on
October 6, 2020)
- Significantly enhanced
market liquidity
- Sundial’s daily average trading value for the last 30 trading
days has been approximately US$52.5 million on the Nasdaq versus
approximately C$1.1 million for Alcanna on the TSX
- Participation in a rapidly
growing diversified business
- Sundial has created a diverse business that now includes
significant retail (including recently acquired Inner Spirit),
production, brands, and investment businesses
- Access to significant
capital to fund future growth
- Sundial has a current unrestricted cash position of
approximately C$628.2 million and marketable securities of
approximately C$114.8 million
- Preservation of Alcanna’s business, brands and leading
team
- Alcanna’s operations will continue
on and grow under the Sundial parent
- Alcanna has the right to nominate
one director to the Sundial board of directors
TRANSACTION DETAILS
The Transaction will be carried out by way of a
court-approved plan of arrangement under the Canada Business
Corporations Act, pursuant to which Sundial will acquire all of the
issued and outstanding common shares of Alcanna. The implementation
of the Transaction will be subject to the approval of at least two
-thirds of the votes cast by Alcanna shareholders at a special
meeting expected to be convened by Alcanna in December 2021 (the
“Meeting”), as well as requisite majority of the
minority approval under Multilateral Instrument 61-101 - Protection
of Minority Security Holders in Special Transactions. The closing
of the Transaction, which is expected to be in December 2021 or in
the first quarter of 2022, is also subject to customary conditions
for transactions of this nature, including the listing of the
Sundial shares issuable pursuant to the Transaction, the receipt of
the applicable orders from the Court of Queen’s Bench of Alberta
and applicable regulatory approvals, including under the
Competition Act (Canada) and the applicable provincial liquor and
cannabis regulators.
The Agreement provides for, among other things,
customary support and non-solicitation covenants from Alcanna,
including customary “fiduciary out” provisions that allow Alcanna
to accept a superior proposal in certain circumstances and a
five-business day “right to match period” in favour of Sundial. The
Agreement also provides for the payment of a termination fee of $10
million payable to Sundial from Alcanna in the event the
Transaction is terminated in certain specified
circumstances. All directors and executive officers of Alcanna
who own common shares of the Company, as well as certain other
shareholders collectively holding approximately 12% of the Alcanna
shares, have entered into voting support agreements with Sundial
pursuant to which, among other things, the parties have agreed to
vote their Alcanna shares in favour of the Transaction.
A full description of the Transaction will be
set forth in the management information circular of Alcanna, which
will be mailed to Alcanna shareholders in connection with the
Meeting, and filed on the System for Electronic Document Analysis
and Retrieval (SEDAR) under Alcanna’s profile at www.sedar.com.
None of the securities to be issued pursuant to
the Agreement have been or will be registered under the United
States Securities Act of 1933, as amended (the “U.S. Securities
Act”), or any state securities laws, and any securities issued in
the Transaction to shareholders resident in the United States are
anticipated to be issued in reliance upon available exemptions from
such registration requirements pursuant to Section 3(a)(10) of the
U.S. Securities Act and applicable exemptions under state
securities laws. This news release does not constitute an offer to
sell or the solicitation of an offer to buy any securities.
ALCANNA BOARD APPROVAL
Alcanna’s board of directors has unanimously
approved the Transaction after receiving the unanimous
recommendation of the special committee of independent directors
(the “Special Committee”). Alcanna’s board of
directors has unanimously resolved to recommend that Alcanna
shareholders vote in favour of the Transaction.
Paradigm Capital Inc. has provided a fairness
opinion to the board of directors of Alcanna that, subject to the
assumptions, limitations and qualifications set out in such
fairness opinion, the consideration to be received by Alcanna
shareholders pursuant to the Transaction is fair, from a financial
point of view, to Alcanna shareholders.
TAX TREATMENT
Canadian taxable resident shareholders of
Alcanna will receive common shares in Sundial on a tax-deferred
rollover basis for Canadian income tax purposes, and other
shareholders will generally not be subject to Canadian income
tax.
ADVISORS
Cormark Securities Inc. is acting as financial
advisor to the special committee of Alcanna and Clark Wilson LLP is
acting as legal counsel to the special committee of Alcanna, and
Bennett Jones LLP is acting as legal counsel to Alcanna.
ATB Capital Markets Inc. is acting as financial
advisor to Sundial and McCarthy Tétrault LLP is acting as legal
counsel to Sundial.
ABOUT ALCANNA INC.
Alcanna is one of the largest private sector
retailers of alcohol in North America and the largest in Canada by
number of stores – operating locations in Alberta and British
Columbia. The Company's majority-owned subsidiary, Nova Cannabis
Inc. (TSXV: NOVC), also operates cannabis retail stores in Alberta,
Ontario, and Saskatchewan. Alcanna's common shares trade on the
Toronto Stock Exchange under the symbol "CLIQ". Additional
information about Alcanna Inc. is available at www.sedar.com and
the Company's website at www.alcanna.com.
ABOUT SUNDIAL GROWERS INC.
Sundial is a public company with common shares
traded on Nasdaq under the symbol "SNDL”. Sundial is a licensed
producer that crafts cannabis using state-of-the-art indoor
facilities. Sundial’s ‘craft-at-scale’ modular growing approach,
award-winning genetics and experienced growers set Sundial apart.
Sundial’s Canadian operations cultivate small-batch cannabis using
an individualized “room” approach, with 448,000 square feet of
total available space. The company’s brand portfolio includes Top
Leaf, Sundial Cannabis, Palmetto and Grasslands. Sundial’s
consumer-packaged goods experience enables the company to not just
grow quality cannabis, but also to create exceptional consumer and
customer experiences. Sundial is proudly Albertan, headquartered in
Calgary, AB, with operations in Olds, AB, and Rocky View County,
AB. For more information on Sundial, please go to
www.sndlgroup.com.
FORWARD-LOOKING INFORMATION
This news release contains forward-looking
statements or information (collectively "forward-looking
statements") within the meaning of applicable securities
legislation, relating to, among other things, the anticipated
benefits of the Transaction; the completion and timing of the
Transaction; the ability and expectation that following completion
of the Transaction, Sundial will continue to experience enhanced
market liquidity and growth; the successful integration of the
businesses of Alcanna and Sundial; Alcanna’s cash flow and retail
operations expertise will further accelerate Sundial’s retail
growth strategy; the ability of the combined company to focus more
management effort on its investment arm; and Alcanna’s operations
will continue on and grow under the Sundial parent. Forward-looking
statements are typically identified by words such as "continue",
"anticipate", "will", "should", "plan", "intend", and similar words
suggesting future events or future performance. All statements and
information other than statements of historical fact contained in
this news release are forward-looking statements.
Readers should not place undue reliance on
forward-looking statements included in this news release.
Forward-looking statements are inherently subject to change and do
not guarantee future performance and actual results may differ
materially from those expressed or implied by the forward-looking
statements. A number of risks, uncertainties and other factors that
may cause actual performance and results to differ materially from
any estimates, forecasts or projections, or could cause our current
objectives, strategies and intentions to change.
The risk factors and uncertainties that could
cause actual performance and results to differ materially from the
anticipated results or expectations expressed in this new release
include, among other things: risks relating to the completion and
the timing of the Transaction; the ability to complete the
Transaction on the terms contemplated by the Agreement and other
agreements, including support agreements, or at all; the ability of
the combined company to realize the anticipated benefits from the
Transaction and the timing thereof; the inability of the parties to
fulfill the conditions precedent to the Agreement, including to
secure regulatory, court and Alcanna shareholder approvals or
objections from other stakeholders. In addition, if and when the
Transaction is consummated, there will be risks and uncertainties
related to the ability of the combined company to successfully
integrate the respective businesses, execute on the strategic
opportunity, as well as the ability to ensure continued performance
or market growth of its products; the duration and severity of the
COVID-19 pandemic on the business, operations and financial
condition of the combined company; the risk that the combined
company will be unable to execute its strategic plan and growth
strategy, including the capital allocation and retail cannabis
strategy, as planned without significant adverse impacts from
various factors beyond its control; dependence on suppliers;
potential delays or changes in plans with respect to capital
expenditures and the availability of capital on acceptable terms;
risks inherent in the liquor retail and cannabis industries;
competition for, among other things, customers, supply, capital and
skilled personnel; changes in labour costs and markets; incorrect
assessments of the value of acquisitions; general economic and
political conditions in Canada (including Alberta), and globally;
industry conditions, including changes in government regulations;
fluctuations in foreign exchange or interest rates; unanticipated
operating events; failure to obtain regulatory and third‐party
consents and approvals when required; changes in tax and other laws
that affect us and our security holders; the potential failure of
counterparties to honour their contractual obligations; stock
market volatility; and the other factors described in Alcanna’s
public filings.
In addition, if the Transaction is not
completed, and each of the parties will continue as an independent
entity, there are risks that the announcement of the Transaction
and the dedication of substantial resources of each party to the
completion of the Transaction could have an impact on such party's
business relationships, and could have a material adverse effect on
the current and future operations, financial conditions and
prospects of such party. Readers are cautioned that this list of
risk factors should not be construed as exhaustive.
The forward-looking statements contained in this
news release are made as of the date hereof. Except as expressly
require by applicable securities legislation, Alcanna does not
undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. The forward-looking statements
contained in this news release are expressly qualified by this
cautionary statement.
FOR FURTHER INFORMATION
James BurnsVice Chair & Chief Executive
OfficerAlcanna Inc.(587) 460-1026
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