CALGARY, AB, Oct. 7, 2021 /CNW/ - Sundial Growers Inc.
(NASDAQ: SNDL) ("Sundial" or the "Company") is
pleased to announce today that it has entered into an arrangement
agreement (the "Agreement") with Alcanna Inc. (TSX: CLIQ)
("Alcanna") pursuant to which Sundial will acquire all of
the issued and outstanding common shares of Alcanna ("Alcanna
Shares") by way of a statutory plan of arrangement for total
consideration of approximately $346 million (the
"Transaction"). For more information on the announcement, a
presentation deck can be found here.
With over 25 years of experience in retailing regulated
products, Alcanna is Canada's
largest private liquor retailer, operating 171 locations
predominantly in Alberta under its
three retail brands "Wine and Beyond", "Liquor Depot" and "Ace
Liquor". Alcanna's strategic partner, in which it holds an
approximately 63% equity interest, Nova Cannabis Inc. (TSX: NOVC)
("Nova"), is one of Canada's largest cannabis retailers offering a
wide range of high-quality cannabis products at value prices. Nova
currently operates 62 stores across Alberta, Saskatchewan and Ontario primarily under the "Value Buds" and
"Nova Cannabis" banners.
KEY TRANSACTION HIGHLIGHTS
- Improved cash flow profile with expansion into liquor:
Alcanna's longstanding liquor business provides Sundial with stable
cash generation through a mature and proven business model with
trailing twelve months free cash flow of $16.4 million on a built-out retail
platform.
- Enhanced exposure with investment in Nova, a publicly
listed, pure-play cannabis retail operator: Sundial's current
retail network combined with Nova's store count implies that the
combined company will be a Canadian cannabis retail market leader
with more than 170 locations. This network strengthens Sundial's
position as a partner to the industry and represents a critical
route to market for Canadian licensed producers.
- Synergies from a larger retail operation: The robust
corporate support function at Alcanna is expected to supplement
Sundial's Spiritleaf retail operations. It is estimated that the
transaction will deliver more than $15
million of additional EBITDA on an annual run-rate basis
through synergies and other strategic initiatives.
- Alcanna shareholders to participate in and help create the
future of Sundial: Alcanna shareholders are to receive Sundial
common shares in an all-stock transaction. The transaction will
provide Alcanna shareholders with exposure to Sundial's core
cannabis operations in Canada and
investment operations focused on deploying capital within the
cannabis sector through its joint venture in SunStream Bancorp Inc.
Beyond improved liquidity and the ability to position for further
retail expansion, Sundial's balance sheet strength provides a
unique opportunity for Alcanna shareholders to participate in
investment growth in the regulated product sector.
"This made-in-Alberta
transaction allows Sundial to further its mission to own the
customer relationship and deliver sustainable value to
shareholders," said Zach George,
Chief Executive Officer of Sundial. "Alcanna's value-focused model
in liquor retailing has created market stability and we believe
that the replication of this playbook in cannabis has strong
potential to drive a similar result. We intend to position all of
our retail exposure for profitability and strive to work with
Canadian licensed producers in order to delight consumers with
quality cannabis products."
"We believe this agreement is a testament to the value created
by everyone at Alcanna and will be beneficial to all of our
stakeholders," said James Burns,
Vice Chair and Chief Executive Officer of Alcanna. "We have been
successful at achieving customer loyalty, and operating at levels
of efficiency that are industry-leading and Sundial will provide
great opportunities as a larger and significantly more liquid
company. We look forward to working with Sundial to complete this
transaction."
Under the terms of the Agreement, Alcanna's shareholders will
receive, for each Alcanna common share held, 10.69 common shares of
Sundial (each whole share, a "Sundial Share") (based on the
trailing 10-day volume-weighted average price ("VWAP") of
the Sundial Shares on the NASDAQ Capital Market prior to the date
of this press release), representing a deemed value of $9.12 per Alcanna Share. The purchase price of
$9.12 per Alcanna Share represents a
premium of 39% to the 10-day VWAP of the Alcanna Shares on the
Toronto Stock Exchange (the "TSX") preceding the signing of
the parties' non-binding letter of intent on September 1, 2021 and a premium of 23% to the
10-day VWAP of the Alcanna Shares on the TSX preceding the
September 15, 2021 press release
regarding recent trading activity (unaffected date). The
Transaction has been unanimously approved by the boards of
directors of Sundial and Alcanna and is expected to close in
December 2021 or in the first quarter
of 2022.
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 Alcanna Shares. The implementation of the Transaction
will be subject to the approval of at least two thirds of the
Alcanna Shares voted by Alcanna shareholders, as well as requisite
majority of the minority approval under Multilateral Instrument
61-101 - Protection of Minority Security Holders in Special
Transactions, at a special meeting expected to be convened by
Alcanna in December 2021 (the
"Meeting"), and the receipt of 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 by Alcanna in the
event the Transaction is terminated in certain specified
circumstances.
All directors and executive officers of Alcanna, who own common
shares of Alcanna, 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
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 a
special committee of Alcanna directors (the "Special
Committee"). Alcanna's board of directors has unanimously
resolved to recommend that the shareholders of Alcanna 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's shareholders.
ADVISORS
ATB Capital Markets Inc. is acting as financial advisor to
Sundial. McCarthy Tétrault LLP is acting as legal counsel to
Sundial.
Cormark Securities Inc. is acting as financial advisor 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.
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. Our
'craft-at-scale' modular growing approach, award-winning genetics
and experienced growers set us apart. Our Canadian operations
cultivate small-batch cannabis using an individualized "room"
approach, with 448,000 square feet of total available
space. Sundial's brand portfolio includes Top
Leaf, Sundial
Cannabis, Palmetto and Grasslands.
Our consumer-packaged goods experience enables us to not just
grow quality cannabis, but also to create
exceptional consumer and customer experiences. We are 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.
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 171 locations in Alberta and British
Columbia. Alcanna's strategic partner, Nova Cannabis Inc.
(TSX: NOVC), also operates 62 cannabis retail stores in
Alberta, Ontario and Saskatchewan.
Additional Information
Further information regarding the Transaction will be contained
in an information circular that Alcanna will prepare and mail to
its shareholders in connection with the Meeting. Investors and
securityholders are urged to read the information circular once it
becomes available, as it will contain important information
concerning the Transaction. Investors and securityholders may
obtain a copy of the Agreement, information circular and other
meeting materials when they become available at www.sedar.com.
Forward-Looking Information
This news release contains statements and information that, to
the extent that they are not historical fact, may constitute
"forward-looking information" or "forward-looking statements"
within the meaning of applicable securities legislation
("forward-looking information"). Forward-looking information
is typically, but not always, identified by the use of words such
as "will", "expected", "projected", "to be" and similar words,
including negatives thereof, or other similar expressions
concerning matters that are not historical facts. Forward-looking
information in this news release includes, but is not limited to,
statements regarding: the completion of the Transaction on the
current terms thereof; the expected closing of the Transaction in
the fourth quarter of 2021; the market value of the consideration
to be received by Alcanna's shareholders; the combined company and
its focus going forward; the anticipated benefits associated with
the Transaction; the Meeting expected to take place in December 2021; and Sundial's capital base
supporting Nova's expansion and opening up new market
opportunities.
Such forward-looking information is based on various assumptions
and factors that may prove to be incorrect, including, but not
limited to, factors and assumptions with respect to: the
Transaction being completed on the timelines and on the terms
currently anticipated; all necessary shareholder, court and
regulatory approvals being obtained on the timelines and in the
manner currently anticipated; the anticipated benefits of the
Transaction; the business and operations of both Sundial and
Alcanna, including that each business will continue to operate in a
manner consistent with past practice and pursuant to certain
industry and market conditions; the ability of Alcanna to
successfully implement its strategic plans and initiatives and
whether such strategic plans and initiatives will yield the
expected benefits; and the receipt by Alcanna of necessary retail
liquor and retail cannabis licences, approvals and authorizations
(as applicable) from regulatory authorities, and the timing
thereof.
Although Sundial and Alcanna believe that the assumptions and
factors on which such forward-looking information is based are
reasonable, undue reliance should not be placed on the
forward-looking information because Sundial and Alcanna can give no
assurance that it will prove to be correct or that any of the
events anticipated by such forward-looking information will
transpire or occur, or if any of them do so, what benefits Alcanna
and/or Sundial will derive therefrom. Actual results could
differ materially from those currently anticipated due to a number
of factors and risks including, but not limited to: the risk that
the Transaction is not completed as anticipated or at all,
including the timing thereof, and if completed, that the benefits
thereof will not be as anticipated; the risk that necessary
shareholder, court or regulatory approvals are not obtained as
anticipated or at all, and the timing thereof; the risk that the
conditions to closing of the Transaction are not satisfied or
waived; risks associated with general economic conditions; adverse
industry events; future legislative, tax and regulatory
developments, including developments that may impact the closing of
the Transaction as anticipated or at all; conditions in the liquor
and cannabis industries; the risk that Alcanna does not receive the
necessary retail liquor or cannabis approvals and/or authorizations
or that they are not able to open additional retail liquor or
cannabis stores, directly or indirectly, as anticipated or at all;
the ability of management to execute its business strategy,
objectives and plans; the availability of capital to fund the
build-out and opening of additional retail liquor or cannabis
stores; and the impact of general economic conditions and the
COVID-19 pandemic in Canada.
Additional information regarding risks and uncertainties
relating to Alcanna's business are contained under the heading
"Risk Factors" in Alcanna's annual information form for the
financial year ended December 31,
2020 dated March 25, 2021.
Additional information regarding risks and uncertainties relating
to Sundial's business are contained under "Item 3D Risk Factors" in
Sundial's Annual Report on Form 20-F, which was filed with the
Securities and Exchange Commission on March
17, 2021. The forward-looking information included in this
news release is made as of the date of this news release. Alcanna
and Sundial do not undertake an obligation to publicly update such
forward-looking information to reflect new information, subsequent
events or otherwise, except as required by applicable law.
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SOURCE Sundial Growers Inc.