Aphria is fighting a hostile bid by Green Growth Brands

Jan 24 2019, 11:44 pm

Green Growth Brands is moving ahead with an uninvited offer to the investors of the Lemington, Ontario cannabis company Aphria.

On January 23, GGB formally opened their offer to current investors for all issued and outstanding common shares. Keeping pace with the move, Aphria has released multiple notices categorizing the GGB offer as significantly undervaluing the company, and has asked their investors to wait as their board reviews the proposal.

The move is no surprise, GGB has been making their intentions clear for Aphria since last year. Capitalizing on low, year-end trading prices of the stock, they released a proposed plan to acquire the company on December 27. And again, on the final day of 2018, welcoming “early expressions of interest from Aphria shareholders who are frustrated with Aphria’s performance and absence of compelling future plans for the company.”

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Aphria calls the proposal opportunistic and “deprived of reward” for their shareholders.

The most recent release reiterates the position of the Aphria board, “that GGB’s unsolicited proposal significantly undervalued the company relative to its current and future value.”

“We are also determined to protect Aphria shareholders from opportunistic offers that fail to reflect the substantial value and growth prospects we have built at Aphria,” says Irwin Simon, Aphria’s independent board chair, a group assembled to review the proposal. “We will evaluate GGB’s offer in this spirit.”

The official offer from GGB, published on January 23, offers $9.41 per Aphria Share. A “24.5% premium over the Aphria Shares’ closing price of $7.56 on the Toronto Stock Exchange on December 24, 2018, the last trading day prior to GGB’s public announcement.” The lack of adjustment is a key sticking point for the value of the deal, as Aphria closed on January 25 at $9.43.

If Aphria’s shareholders were to accept the offer, GGB’s offer says they would have an ownership position of approximately 60% in the combined company, and GGB shareholders will represent approximately 40%.

GGB originates from Ohio, but is currently headquartered in Toronto. It is expanding rapidly into the medical and recreational cannabis business and recently hired former Toronto city councillor Giorgio Mammoliti as its director of government relations to help navigate the local regulatory environment.

Their proposal lays out the belief that the combination of the two companies is a “value-enhancing opportunity and is a superior alternative to the status quo at Aphria.” The company is hoping that the retail capabilities combined with Aphria’s production capabilities will sway stockholders.

Aphria is a licensed producer of cannabis with a market cap of over $2.3 billion on the TSX, that runs large scale greenhouse production in Lemington, Ontario. It was one of the first Canadian cannabis companies to list publicly, both in Toronto and New York.

GGB’s offer will remain open until May 6.

Peter SmithPeter Smith

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