Alcanna Inc. has entered into an arrangement agreement with Sundial Growers Inc. 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., 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.
