Investment creates additional platform on
which to build portfolio of premium West Coast cannabis
products
LEAMINGTON, ON and KELOWNA, BC, Dec. 21,
2017 /CNW/ - As part of the proposed combination of TS
BrandCo. Holdings Inc. (operating as "Tokyo Smoke") and DOJA
Cannabis Company Limited ("DOJA") (CSE: DOJA)
announced earlier today, Aphria Inc. ("Aphria" or the
"Company") (TSX: APH and US OTC: APHQF) is
pleased to announce that it has committed to make a $10 million equity investment in the combined
company, which is expected to be renamed Hiku Brand Company Ltd.
("Hiku"). The combination of Tokyo Smoke and
British Columbia based DOJA would
bring together two premium lifestyle brands to serve the
anticipated recreational cannabis market. Aphria's investment
represents an advancement of the Company's strategy to be a leader
in the recreational market, once legalized in Canada.
"This exciting announcement marks a major step forward in
Aphria's recreational cannabis strategy and represents Aphria's
first venture into the lucrative British
Columbia premium cannabis market." said Vic Neufeld, CEO of Aphria. "In Hiku, we are
investing in refined, up-market brands that align with our
commitment to encouraging a more dignified positioning of
recreational cannabis use, something we expect will be an important
and valuable differentiator for Aphria as Canada moves closer to legalizing recreational
cannabis. We look forward to working closely with Hiku to support
its success and brand leadership in the recreational market."
"This strategic partnership and investment from Aphria
represents the ultimate validation of Hiku's vision to offer the
leading cannabis consumer experience. We are ecstatic to be
partnering again with Aphria, a proven operator and greenhouse
cannabis cultivator, to bring our products to the Canadian medical
and future recreational markets," said Alan
Gertner, Chief Executive Officer of Hiku. "With this
landmark partnership, we have the opportunity to offer Canadians a
compelling combination of craft British Columbia product, top notch branding,
greenhouse supply and owned retail that will allow Hiku to have a
distinct business with high quality control, high demand and high
margin."
The equity investment in Hiku builds on Aphria's existing
investment in Tokyo Smoke. On June 30,
2017, Aphria entered into a subscription agreement with
Tokyo Smoke for the purchase of 140,845 common shares, for a total
cost of $1,000,000. As part of an
existing licensing agreement signed in September 2016, Aphria also produces and ships
Tokyo Smoke branded cannabis in Canada to registered patients through the
Access to Cannabis for Medical Purposes Regulations
("ACMPR") system. The existing licensing agreement also
contains provisions for the agreement to apply to the anticipated
adult recreational use market.
Aphria's equity investment remains conditional on (i) completion
of the combination; (ii) regulatory approval; (iii) Tokyo Smoke
shareholder approval; and, (iv) standard closing conditions,
including the approval of definitive agreement by the boards of
Tokyo Smoke and DOJA and completion of due diligence investigations
to the satisfaction of each of the parties. The legal structure for
the combination will be confirmed after the parties have considered
all applicable tax, securities law, and accounting
efficiencies. Tokyo Smoke and DOJA expect to complete the
definitive agreements by January 15,
2018.
In addition to the contemplated equity investment in Hiku,
Aphria will establish an agreement with Hiku that includes:
- A supply agreement that builds on the existing supply agreement
for the dried flower between Aphria and Tokyo Smoke that adds
high-quality cannabis oil to the list of products Aphria will white
label for the Tokyo Smoke brand; and,
- The issuance of 0.8 million units in Hiku, on the same terms as
the equity investment, to Aphria in exchange for entering the
supply agreement.
In addition to the agreement noted above, Aphria and Hiku are
currently in the process of finalizing the following, to take
affect once DOJA's wholly-owned subsidiary receives its license to
sell cannabis under the ACMPR:
- A supply agreement whereby Aphria will have access to DOJA's
premium West Coast cannabis;
- A tolling agreement whereby Aphria will process cannabis oil
for Hiku using dried cannabis supplied by DOJA;
- A distribution agreement whereby Aphria will have access to
Hiku's independent retail locations in provinces where private
licenses will be granted; and
- DOJA will leverage Aphria's distribution network to sell
branded cannabis. DOJA's subsidiary has requested a pre-sales
license inspection from Health Canada, the last step prior to
issuance of a sales license under the ACMPR.
Additional Transaction Details
- The share value for Aphria's equity is $1.39, priced at the 5-day VWAP (volume weighted
average price) as of today's market close. As a result, Aphria
would receive 7,194,244 common shares in Hiku;
- Aphria will receive a full warrant for each common share it
receives, exercisable for a two-year period, priced at $2.10, a 50% premium to the share value of its
investment on the date of announcement; and,
- The warrant maintains a forced conversion feature, for the
benefit of Hiku, priced at $3.05 or
120% premium on the share value of Aphria's
investment.
We Have a Good Thing Growing.
About Aphria
Aphria Inc., one of Canada's
lowest cost producers, produces, supplies and sells medical
cannabis. Located in Leamington,
Ontario, the greenhouse capital of Canada. Aphria is truly powered by sunlight,
allowing for the most natural growing conditions available. Aphria
is committed to providing pharma-grade medical cannabis, superior
patient care while balancing patient economics and returns to
shareholders.
About DOJA
DOJA™ is a premium cannabis lifestyle brand growing high-quality
handcrafted cannabis flower. DOJA's wholly owned subsidiary is a
licensed producer of cannabis under the ACMPR that has requested
its Pre-Sales License Inspection, the last step prior to receiving
a license to sell cannabis under the ACMPR. DOJA's state-of-the-art
ACMPR licensed production facility is located in the heart
of British Columbia's picturesque Okanagan Valley. DOJA
was founded by the proven entrepreneurial team that started SAXX
Underwear®.
About Tokyo Smoke
Tokyo Smoke is an award-winning lifestyle brand that brings
sophistication and design to coffee, clothing and cannabis. Founded
by father and son, Lorne and Alan
Gertner, Tokyo Smoke is based on a strong passion for design
and strong desire to elevate the cannabis landscape. Located in
Toronto, Ontario, the brand's
flagship location, Tokyo Smoke Found, launched in April 2015. Tokyo Smoke will expand its retail
and recreational cannabis presence into the United States in 2017.
About Hiku
Hiku is focused on handcrafted cannabis production, immersive
retail experiences, and building a portfolio of iconic, engaging
cannabis lifestyle brands. Hiku is differentiated as the only
Canadian craft cannabis producer with a significant national retail
footprint and a growing brand house including premium cannabis
lifestyle brands DOJA, Tokyo Smoke, and Van
der Pop. Hiku's wholly owned subsidiary, DOJA, is a
federally licensed producer pursuant to the ACMPR, owning two
production facilities in the heart of British Columbia's Okanagan Valley. The
company operates a network of retail stores selling coffee,
clothing and curated accessories, across British Columbia, Alberta and Ontario.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: Certain
information in this news release constitutes forward-looking
statements under applicable securities laws. Any statements that
are contained in this news release that are not statements of
historical fact may be deemed to be forward-looking statements.
Forward looking statements are often identified by terms such as
"may", "should", "anticipate", "expect", "potential", "believe",
"intend" or the negative of these terms and similar expressions.
Forward-looking statements in this news release include, but are
not limited to, statements with respect to internal expectations,
the combination of Tokyo Smoke and DOJA and its renaming,
expectations with respect to the performance of Hiku's stock
performance, expectations for future growing capacity and costs,
the completion of any capital project or expansions, expectations
with respect to future production costs and the legalization of
recreational cannabis in Canada.
Forward-looking statements necessarily involve known and unknown
risks, including, without limitation, risks associated with general
economic conditions; adverse industry events; marketing costs; loss
of markets; future legislative and regulatory developments
involving medical cannabis and the legalization of recreational
cannabis; inability to access sufficient capital from internal and
external sources, and/or inability to access sufficient capital on
favourable terms; the medical cannabis industry in Canada generally, income tax and regulatory
matters; the ability of Aphria to implement its business
strategies; competition; crop failure; currency and interest rate
fluctuations and other risks.
Readers are cautioned that the foregoing list is not exhaustive.
Readers are further cautioned not to place undue reliance on
forward-looking statements as there can be no assurance that the
plans, intentions or expectations upon which they are placed will
occur. Such information, although considered reasonable by
management at the time of preparation, may prove to be incorrect
and actual results may differ materially from those
anticipated.
Forward-looking statements contained in this news release are
expressly qualified by this cautionary statement.
SOURCE Aphria Inc.