/NOT FOR DISSEMINATION IN THE UNITED
STATES OR FOR DISTRIBUTION TO UNITED
STATES WIRE SERVICES./
EDMONTON, July 24, 2019 /CNW/ - Fire & Flower Holdings
Corp. ("Fire & Flower" or the "Company") (TSXV: FAF),
today announced that it has entered into a subscription agreement
(the "Subscription Agreement") with respect to a strategic
investment (the "Transaction") by an indirect wholly-owned
subsidiary of Alimentation Couche-Tard Inc. ("Couche-Tard") (TSX:
ATD.A ATD.B). The Company is also pleased to announce that it has
received conditional approval to post its common shares (the
"Common Shares") for trading on the Toronto Stock Exchange (the
"TSX").
The Subscription Agreement allows for Couche-Tard to obtain a
controlling interest in the Company with an aggregate investment of
more than $380,000,000 of growth
capital for Fire & Flower's global expansion (the "Strategic
Investment").
Fire & Flower has demonstrated that it is capable of rapidly
scaling its retail platform through a best-of-class store concept,
a leading digital platform and a focus on the safe, responsible and
lawful sale of cannabis. This investment will provide Fire &
Flower with additional funds to support the further development of
its proprietary Hifyre™ digital retail platform and expansion of
its retail store network across Canada and internationally where legally
permitted.
Highlights of the Transaction
- Couche-Tard will initially purchase $25,989,985.42 principal amount of convertible
unsecured debentures (the "Debentures") that are convertible into
an aggregate of 24,289,706 Common Shares at a price of $1.07 per Common Share, representing a 9.9%
ownership interest in Fire & Flower;
- Couche-Tard will concurrently receive three series' of common
share purchase warrants (the "Warrants"), which, if exercised in
full, along with certain other investor rights, would subsequently
increase Couche-Tard's ownership interest to 50.1% on a
fully-diluted basis (assuming the conversion in full of the
Debentures) and provide more than $380,000,000 in growth capital to the
Company;
- Fire & Flower will grant board nomination rights to
Couche-Tard which escalate commensurate with the exercise of the
Warrants and the increase in Couche-Tard's ownership position;
and
- Concurrent with the closing of the Transaction, the Company
will uplist to the TSX.
"This strategic investment by Couche-Tard, one of the world's
largest retailers, is transformative for Fire & Flower. The
retail cannabis platform we developed marries a best-in-class
in-store experience with our proprietary Hifyre™ digital
infrastructure and this is a huge vote of confidence in the
platform," shared Trevor Fencott,
Fire & Flower's Chief Executive Officer. "The support of
Couche-Tard's world-class leadership team, coupled with their
impressive international footprint which includes major markets
such as the US, Mexico and
Europe, provide us with
outstanding opportunities for aggressive growth."
"Couche-Tard is excited to make this strategic investment in one
of the fastest growing cannabis 'pure-play' retailers," said
Brian Hannasch, President and CEO of
Couche-Tard. "This investment in Fire & Flower, with a path to
a controlling stake, will enable us to leverage their leadership,
network and advanced digital platform to accelerate our journey in
this new and flourishing sector."
Benefits Of The Transaction
- Accelerates Fire & Flower's pace of growth and
expansion. Assuming full conversion of the Debentures and full
exercise of the Warrants an aggregate investment of more than
$380,000,000 is expected to allow the
Company to significantly accelerate both the number of stores it is
able to open as well as the number of markets it is potentially
able to access.
- Leverages Couche-Tard's vast international infrastructure
and experience for global expansion opportunties. With 16,000
stores in 25 countries around the world, it is expected that the
strategic investment and relationship with Couche-Tard will
positively impact Fire & Flower's international growth
capabilities.
- Provides significant, new possible commercialization and
innovation leadership opportunities for Fire & Flower's
proprietary Hifyre™ digital platform. Couche-Tard shares Fire
& Flower's committment to innovation and the parties intend to
explore additional ways to grow and expand Hifyre's™
capabilities and commercialization opportunities.
- Provides access to Couche-Tard's leadership team. As a
recognized leader in profitable, large-scale, global retail,
increasing representation by Couche-Tard's leadership team on the
board of directors of Fire & Flower (the "Board") is expected
to provide significant benefits as the Company scales its
operations.
- Delivers potential upside opportunities for Fire &
Flower shareholders. The strategic investment, access to
Couche-Tard's leadership and retail infrastructure, combined with
their complimentary international scale and experience are expected
to better position Fire & Flower for growth and value creation
with benefits to all of the Company's stakeholders, including its
shareholders, employees and partners.
Fire & Flower Board Recommendation
The Board, after consultation with its legal and financial
advisors, has unanimously determined that the Transaction is in the
best interest of Fire & Flower and is unanimously recommending
that shareholders vote in favour of the Transaction. In making
this determination, the Board considered a number of factors,
including the receipt of a fairness opinion from each of Eight
Capital and AltaCorp Capital Inc. that, based upon and subject to
the assumptions, qualifications and limitations as set out in such
fairness opinions, as of such date, the financial terms of the
Transaction are fair, from a financial point of view, to the
Company.
Key Transaction Terms
Issuance of Convertible Debentures
- Under the Subscription Agreement, Fire & Flower will issue
to Couche-Tard $25,989,985.42
principal amount of Debentures. The Debentures will bear interest
at a rate of 8.0% per annum, payable semi-annually.
- The principal amount of Debentures may be converted into
24,289,706 Common Shares at $1.07 per
Common Share (subject to customary adjustments), being the 5-day
volume weighted average price of the Common Shares upon entering
into the Subscription Agreement.
- The Debentures will mature on the later of (a) June 30, 2021; and (b) the date that is 90 days
following the date certain existing debt of the Company is retired,
converted or otherwise transferred (collectively, the "Maturity
Date").
- When Fire & Flower hits the milestone of having 45 licensed
stores operational, the Maturity Date may be accelerated by Fire
& Flower to as early as December 31,
2020.
- Under certain circumstances and conditions, if the Debentures
are not converted prior to Maturity, Fire & Flower may elect to
repay the principal amount, together with unpaid and accrued
interest thereon, in whole or in part, through the issuance of
Common Shares at a price equal to 95% of the 20-day volume weighted
average price of the Common Shares on the Maturity Date.
Warrants
- On closing of the Transaction, Couche-Tard will receive (i)
30,634,322 series A common share purchase warrants (the "Series
A Warrants"); (ii) 56,126,890 series B common share purchase
warrants (the "Series B Warrants"); and (iii) 110,703,925
series C common share purchase warrants (the "Series C
Warrants"). The initial exercise price per Common Share (the
"Initial Exercise Price") of the: (i) Series A Warrants is
$1.40; (ii) Series B Warrants is
$1.875; and (iii) Series C Warrants
is the lesser of: (A) $6.00; and (B)
the greater of (1) $2.00; and (2) the
20-day volume-weighted average price of the Common Shares on the
last business day prior to the exercise of the Series C
Warrants.
- The Series A Warrants will expire on the date which is ninety
(90) days following the earlier of: (i) the Maturity Date; and (ii)
the later of: (A) December 31, 2020;
and (B) the date on which the Company accelerates the
Debentures.
- The Series B Warrants will expire on the date that is one (1)
year from the date all of the Series A Warrants have been
exercised, provided that the Series B Warrants shall expire if the
Series A Warrants expire unexercised.
- The Series C Warrants will expire on the earlier of: (i) one
(1) year from the date all of the Series B Warrants have been
exercised; and (ii) four (4) years from the closing of the
Transaction, provided that the Series C Warrants shall expire if
the Series A Warrants or the Series B Warrants expire
unexercised.
- The Series A Warrants may not be exercised until the principal
amount of Debentures has been converted in full. The Series B
Warrants may not be exercised until the Series A Warrants have been
exercised in full. The Series C Warrants may not be exercised until
the Series B Warrants have been exercised in full.
- In addition, the Company will issue to Couche-Tard such
additional number of Warrants (the "Additional Warrants") to
ensure that upon full exercise of the: (i) Series A Warrants, the
holder thereof will hold 19.9% of the issued and outstanding Common
Shares on a pro forma fully-diluted basis; (ii) Series B Warrants,
the holder thereof will hold 33.4% of the issued and outstanding
Common Shares on a pro forma fully-diluted basis; and (iii) Series
C Warrants, the holder thereof will hold 50.1% of the issued and
outstanding Common Shares on a pro forma fully-diluted basis. The
above percentages assume full conversion of the Debentures.
Notwithstanding the foregoing, the number of Additional Warrants to
be issued shall be not greater than 1,000,000,000.
Investor Rights
Concurrent with the closing of the Transaction, the Company and
Couche-Tard will enter into an investor rights agreement (the
"Investor Rights Agreement"), pursuant to which Couche-Tard shall
be entitled to designate one nominee (an "Investor Nominee") for
election to the Board. For so long as (i) the Debentures
remain outstanding in full; (ii) Couche-Tard owns at least 9.9% of
the issued and outstanding Common Shares; or (iii) Couche-Tard is
entitled (including pursuant to the exercise of certain
participation and top-up rights as further set out in the Investor
Rights Agreement), to acquire Common Shares, which, together with
the other Common Shares held by Couche-Tard, would represent at
least 9.9% of the issued and outstanding Common Shares, Couche-Tard
shall also be entitled to designate a number of Investor Nominees
for election to the Board proportionate to its then Common Share
ownership interest in the Company. In addition, the Investor
Rights Agreement provides Couche-Tard with certain registration
rights with respect to its Common Shares.
Closing Conditions
The Transaction is subject to customary closing conditions and
applicable regulatory approvals, including the receipt of approval
by the holders of Common Shares as required by the policies of the
TSX. In addition, conditional upon completion of the Transaction
and the satisfaction of certain customary conditions of uplisting,
Fire & Flower will be graduating from the TSX Venture Exchange
to the TSX.
Voting and Support Agreements
Concurrent with the entering into of the Subscription Agreement,
certain directors, officers and shareholders of the Company have
entered into voting and support agreements pursuant to which such
parties have agreed to vote an aggregate of 23,069,271 Common
Shares in favour of the Transaction, representing approximately
19.6% of the issued and outstanding Common Shares
Advisors
GMP Securities LP is acting as financial advisor to Fire &
Flower and Dentons Canada LLP is acting as its legal
advisor. In addition, each of Eight Capital and AltaCorp
Capital Inc. provided a fairness opinion that, based upon and
subject to the assumptions, qualifications and limitations set out
therein, the financial terms of the Transaction are fair, from a
financial point of view, to the Company.
National Bank Financial Inc. is acting as exclusive financial
advisor to Couche-Tard and Davies Ward Phillips & Vineberg LLP
is acting as its legal advisor.
Additional Information
Copies of the Subscription Agreement and the agreements attached
thereto as exhibits, including the form of Debenture certificate,
the form of Warrant certificate and the form of Investor Rights
Agreement, will be filed on the Company's profile on SEDAR at
www.sedar.com. The above descriptions of the terms and conditions
of the Subscription Agreement and the agreements attached thereto
as exhibits, are qualified in their entirety by the terms of the
Subscription Agreement.
About Fire & Flower
Fire & Flower is a leading purpose-built, independent
adult-use cannabis retailer poised to capture significant
Canadian market share. The Company guides consumers through the
complex world of cannabis through education-focused, best-in-class
retailing while the Hifyre™ digital platform connects consumers
with cannabis products. The Company's leadership team combines
extensive experience in the cannabis industry with strong
capabilities in retail operations.
Fire & Flower Holdings Corp. owns all issued and outstanding
shares in Fire & Flower Inc., a licensed cannabis retailer in
the provinces of Alberta and
Saskatchewan and is a consultant
and licensor to Fire & Flower-branded retail locations in the
province of Ontario.
About Alimentation Couche-Tard Inc.
Couche-Tard is the leader in the Canadian convenience store
industry. In the United States, it
is the largest independent convenience store operator in terms of
the number of company-operated stores. In Europe, Couche-Tard is a leader in convenience
store and road transportation fuel retail in the Scandinavian
countries (Norway, Sweden and Denmark), in the Baltic countries (Estonia, Latvia and Lithuania), as well as in Ireland, and has an important presence in
Poland.
As of April 28, 2019,
Couche-Tard's network comprised 9,866 convenience stores throughout
North America, including
8,629 stores with road transportation fuel dispensing. Its
North American network consists of 19 business units,
including 15 in the United
States covering 48 states and 4 in Canada covering all 10 provinces.
Approximately 109,000 people are employed throughout its network
and at its service offices in North
America. In addition, through CrossAmerica Partners LP,
Couche-Tard supplies road transportation fuel under various brands
to approximately 1,300 locations in the United States.
In Europe, Couche-Tard operates
a broad retail network across Scandinavia, Ireland, Poland, the Baltics and Russia through ten business units. As of
April 28, 2019, Couche-Tard's network
comprised 2,709 stores, the majority of which offer road
transportation fuel and convenience products while the others are
unmanned automated fuel stations which only offer road
transportation fuel. Couche-Tard also offers other products,
including stationary energy and aviation fuel. Including employees
at branded franchise stores, approximately 24,000 people work in
its retail network, terminals and service offices across
Europe.
In addition, under licensing agreements, more than 2,150 stores
are operated under the Circle K banner in 15 other
countries and territories (Cambodia, China, Costa
Rica, Egypt, Guam, Honduras, Hong
Kong, Indonesia,
Macau, Mexico, Mongolia, New
Zealand, Saudi Arabia, the
United Arab Emirates and
Vietnam), which brings the
worldwide total network to more than 16,000 stores.
For more information on Alimentation Couche-Tard Inc. or to
consult its quarterly Consolidated Financial Statements and
Management Discussion and Analysis, please visit:
https://corpo.couche‑tard.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This news release contains certain
forward-looking information within the meaning of applicable
Canadian securities laws ("forward-looking statements"). All
statements other than statements of present or historical fact are
forward-looking statements. Forward-looking statements are often,
but not always, identified by the use of words such as
"anticipate", "achieve", "could", "believe", "plan", "intend",
"objective", "continuous", "ongoing", "estimate", "outlook",
"expect", "project" and similar words, including negatives thereof,
suggesting future outcomes or that certain events or conditions
"may" or "will" occur. These statements are only
predictions.
Forward-looking statements are based on the opinions and
estimates of management of the Company at the date the statements
are made based on information then available to the Company.
Various factors and assumptions are applied in drawing conclusions
or making the forecasts or projections set out in forward-looking
statements. Forward-looking statements are subject to and
involve a number of known and unknown risks and uncertainties, many
of which are beyond the control of the Company, which may cause the
Company's actual performance and results to differ materially from
any projections of future performance or results expressed or
implied by such forward-looking statements, including, but not
limited to, the closing of the Transaction, the conversion and
exercise of the Debentures and Warrants, respectively, thereunder,
the graduation of the Company to the facilities of the TSX, the
pace of the Company's growth and expansion and the expansion of
HiFyre's capabilities and commercialization opportunities. No
assurance can be given that the expectations reflected in
forward-looking statements will prove to be correct.
The Company assumes no obligation to publicly update or
revise forward-looking statements to reflect new information,
future events or otherwise, except as expressly required by
applicable law.
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.
SOURCE Fire & Flower Holdings Corp.
