All amounts in Canadian dollars unless otherwise stated
- Alcanna shareholders to receive $9.12 in Sundial common shares per Alcanna common share
- The transaction price represents a premium of 39% to Alcanna’s 10-day VWAP on the TSX preceding the signing of the LOI (September 1, 2021) and a 23% premium to the 10-day VWAP preceding the September 15, 2021 press release regarding recent trading activity (unaffected date)
- The transaction delivers near term value creation for Alcanna shareholders and an opportunity to be part of a larger and significantly more liquid company
- The transaction has received the unanimous approval of Alcanna’s Board of Directors
EDMONTON, Alberta, Oct. 07, 2021 (GLOBE NEWSWIRE) — 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
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.
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.
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.
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
Vice Chair & Chief Executive Officer