NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR
FOR DISSEMINATION IN THE UNITED STATES
Highlights:
- Proposed transaction provides a 47% premium to Terrace
Global’s current share price and a premium of 76% to the last
Terrace Global financing at $0.125 per share.
- Share-based acquisition allows Terrace Global shareholders
to continue to participate in upside of combined companies and
benefit from enhanced liquidity and access to capital.
- Complimentary operations in Portugal and existing joint
venture secures control over the entire cannabis value chain and
leverages existing international partnerships and
expertise.
- Flowr has secured support from approximately 38% of the
shareholders of Terrace Global.
- Strong balance sheet with more than $31 million in combined
cash and marketable securities to support growth. Significant debt
reduction and improved credit covenants contemplated by the
transaction as a result of a minimum Flowr 10% subordinated secured
debenture conversion of approximately $11.9 million.
Terrace Global Inc. (TSXV: TRCE) (“Terrace Global” or the
“Company”) is pleased to announce it has entered into a
definitive arrangement agreement (the “Agreement”) pursuant
to which The Flowr Corporation (TSXV: FLWR) (“Flowr”) will
acquire all of the issued and outstanding common shares in the
capital of Terrace Global (the “Transaction”).
Under the terms of the Agreement, holders of Terrace Global
common shares will receive 0.4973 of a common share of Flowr
(“Flowr Shares”) for each Terrace Global common share held
(“Terrace Global Shares”). Upon completion of the
Transaction, existing Flowr and Terrace Global shareholders would
own approximately 60.9% and 39.1% of the pro forma company,
respectively, on a fully diluted in-the-money basis (including the
conversion of $11.9 million of Flowr convertible debentures).
The exchange ratio implies a price of $0.22 per Terrace Global
common share and a premium of approximately 47%, based on the
thirty (30) day volume weighted average prices of Flowr Shares on
the TSX Venture Exchange and the spot price of Terrace Global as of
October 19, 2020.
Transaction Highlights
- Significant Premium Paid: The implied premium being paid
by Flowr is approximately 47% based upon the closing price of the
Terrace Global Shares on October 19, 2020 and a premium of
approximately 76% to the last Terrace Global financing at $0.125
per share.
- Continued Participation in Expanded Platform for Future
Growth in Canada and Europe: Terrace Global shareholders,
through their ownership of Flowr Shares, will have the opportunity
to participate in the growth of Flowr and will benefit from the
enhanced growth prospects of the combined company. Flowr is a
leading high-THC cultivator with a strong brand presence in Canada
and also has a strong toehold position in the burgeoning European
medical cannabis market.
- Terrace Shareholder Alignment with Flowr Shareholders:
As part of the Transaction, all insiders of Flowr will be required
to convert their 10% subordinated secured debentures into Flowr
Shares, representing a conversion of at least $11.9 million
principal amount of debentures. Flowr will also use commercially
reasonable efforts to secure the full conversion of all of the
issued and outstanding convertible debentures in the aggregate
principal amount of $21.6 million.
- Strengthening Vertically Integrated Global Cannabis
Company: Flowr is a leading global cannabis company and market
leader with its distinct Flowr brand. This transaction strengthens
Flowr’s international presence and improves access to multiple
demographic segments.
- Alignment with Strong Management Team: Terrace Global
was created by a group of pioneers in the cannabis sector who have
decades of international experience in the cannabis market and
include the founders of MedReleaf Corp., ICC Labs Inc. and Bedrocan
Cannabis Corp. Both Flowr and Terrace Global boast sector leading
insider ownership. Terrace Global to have three nominees on the
reconstituted board of directors of Flowr.
- Robust Financial Position: Flowr and Terrace Global
currently have a combined $31 million in cash and marketable
securities, which will be used to support brand building, outdoor
grow operations, and pursue strategic opportunities and investments
that maximize shareholder value.
- Concurrent Liability Management: As a condition
precedent to the closing of the Transaction, Flowr will be required
to negotiate more favourable terms with its senior creditors to
improve its credit covenant package and it will also benefit from a
basket for future subordinated secured debenture financing in the
amount of at least $11.9 million. This will provide additional
financial flexibility for Flowr going forward. The net result is
that at closing of the Transaction, Flowr will have reduced its
overall indebtedness by at least $11.9 million.
- Improved Capital Markets Profile: Flowr will be a
leading licensed producer appealing to a broader shareholder base,
with greater access to capital and improved trading liquidity.
- Accretive Synergies: The combined entity is estimated to
realize annual synergies of approximately $2 million per year,
allowing Flowr to operate more efficiently with a commitment to
continued excellence.
“Terrace Global and Flowr have enjoyed a collaborative and
symbiotic working relationship and share similar philosophies,
making this transaction a strong fit for us. With Flowr, we believe
that we can realize our full potential and are excited to
participate in the upside of Flowr,” commented Francisco Ortiz von
Bismarck, Chief Executive Officer of Terrace Global. “Combining our
complimentary management expertise, and collaborative strengths
will result in a combined entity that is poised for global
growth.”
Terms of the Transaction
The Transaction will be affected by way of a court approved plan
of arrangement under the Business Corporations Act (Ontario) (the
“Arrangement”). Under the terms of the Transaction, each
shareholder of Terrace Global (“Terrace Global Shareholder”)
will receive 0.4973 of a Flowr Share per Terrace Global Share,
which implies a price per Terrace Global Share of $0.22 based on
the thirty (30) day volume weighted average price (“VWAP”)
of the Flowr Shares and the spot price of Terrace Global Shares on
the TSX Venture Exchange (“TSXV”) as of October 19,
2020.
The Transaction is subject to the approval of the Ontario
Superior Court of Justice (Commercial List). The Transaction will
also require the approval at a special meeting of Terrace Global
Shareholders (the “Terrace Global Special Meeting”) of not
less than two-thirds (66 2/3%) of the votes validly cast by Terrace
Global Shareholders, present in person or by proxy at the meeting,
and, by a majority of the minority votes validly cast by Terrace
Global Shareholders, present in person or by proxy at the meeting,
as required pursuant to Multilateral Instrument 61-101 – Protection
of Minority Security Holders in Special Transactions.
All of the directors and senior officers of Terrace Global and
other certain shareholders of the Company (who hold in the
aggregate approximately 38% of the issued and outstanding Terrace
Global Shares on a non-diluted basis) have entered into a support
agreement with Flowr to, among other things, support the
Transaction and vote their Terrace Global Shares in favour of the
Transaction.
The Agreement provides for, among other things, the board of
directors of Terrace Global being able to consider a superior
proposal in certain circumstances. The Agreement also provides for
the payment by Terrace Global of a termination fee of up to
$3,000,000 in favour of Flowr in certain circumstances. In
addition, the Agreement provides that, under certain circumstances,
where the Transaction is not completed because of the failure of
Flowr to obtain certain approvals or consents, Flowr would be
required to reimburse Terrace Global’s expenses up to $500,000.
Concurrent Liability
Management
As noted above, the Transaction is conditional upon: (i) the
amendment of the existing indenture governing the 10% subordinated
secured debentures issued by Flowr in the aggregate principal
amount of $21.6 million to enable the early conversion of
approximately $11.9 million of debentures held by insiders of
Flowr; and (ii) certain amendments to the senior secured credit
facility from a syndicate of lenders led by ATB Financial,
including a future basket for the issuance of up to at least $11.9
million subordinated secured debentures on substantially similar
terms to the existing debentures as well as the improvement of
certain credit covenants.
Closing and Closing
Conditions
The Transaction remains subject to certain other closing
conditions including the receipt of certain approvals and the
satisfaction of certain customary closing conditions. The parties
do not anticipate requiring an approval of shareholders of Flowr to
complete the Transaction.
The Board of Directors of Terrace Global (the “Terrace Global
Board”) unanimously recommends that Terrace Global Shareholders
vote in favour of the resolution to approve the Arrangement, which
will be the subject of the Terrace Global Special Meeting expected
to be held in the fourth quarter of 2020. The recommendation of the
Terrace Global Board is supported by a fairness opinion from
Hyperion Capital Inc. to the effect that, as of the date of the
opinion, and subject to the assumptions, limitations and
qualifications on which each such opinion is based, the
consideration to be received by Terrace Global Shareholders
pursuant to the Transaction is fair, from a financial point of
view, to such shareholders.
It is currently expected that, subject to receipt of all
regulatory, court, shareholder and other approvals, and the
satisfaction or waiver of all conditions, the Transaction is
expected to be completed in the fourth quarter of 2020.
Further information regarding the Transaction will be included
in Terrace Global’s management information circular to be mailed to
Terrace Global Shareholders in advance of the Terrace Global
Special Meeting and in Terrace Global’s material change report in
respect of the announcement of the Transaction, each of which will
be filed with the Canadian securities regulators and will be
available under Terrace Global’s profile at www.sedar.com.
Advisors and Counsel
Hyperion Capital Inc. is acting as the financial advisor to
Terrace Global and has provided a fairness opinion to the Terrace
Global Board. Wildeboer Dellelce LLP is acting as legal counsel to
Terrace Global. Norton Rose Fulbright Canada LLP is acting as legal
counsel to the Board of Directors of Terrace Global.
ATB Capital Markets Inc. is acting as the exclusive financial
advisor to Flowr and has provided a fairness opinion to the Flowr
Board. Fasken Martineau DuMoulin LLP is acting as legal counsel to
Flowr.
About Terrace Global
Terrace Global is a Canadian company focused on the development
and acquisition of international cannabis assets. Its single-minded
goal is to unlock value in new jurisdictions. Terrace was created
by a group of pioneers in the cannabis space who have come together
to build a best in class portfolio of assets, across international
markets. With decades of cross-continent relationships, the Terrace
team is uniquely positioned to unlock value in new jurisdictions
like no one else can. For more information about Terrace Global,
please visit terraceglobal.ca.
About The Flowr Corporation
The Flowr Corporation is a Toronto-headquartered cannabis
company with operations in Canada, Europe, and Australia. Its
Canadian operating campus, located in Kelowna, BC, includes a
purpose-built, GMP-designed indoor cultivation facility; an outdoor
and greenhouse cultivation site; and a state-of-the-art R&D
facility. From this campus, Flowr produces recreational and
medicinal products. Internationally, Flowr intends to service the
global medical cannabis market through its subsidiary Holigen,
which has a license for cannabis cultivation in Portugal and
operates GMP licensed facilities in both Portugal and
Australia.
Flowr aims to support improving outcomes through responsible
cannabis use and, as an established expert in cannabis cultivation,
strives to be the brand of choice for consumers and patients
seeking the highest-quality craftsmanship and product consistency
across a portfolio of differentiated cannabis products.
For more information, please visit flowrcorp.com or follow Flowr
on Twitter: @FlowrCanada and LinkedIn: The Flowr Corporation.
Forward-Looking Information and Statements
This news release contains forward-looking statements relating
to the Transaction, including statements regarding the completion
thereof and other statements that are not historical facts. Such
forward-looking statements are subject to important risks,
uncertainties and assumptions. The results or events predicted in
these forward-looking statements may differ materially from actual
results or events. As a result, you are cautioned not to place
undue reliance on these forward-looking statements. The completion
of the Transaction is subject to a number of terms and conditions,
including, without limitation: (i) applicable governmental
approvals (including the TSX Venture Exchange), (ii) required
shareholder approvals, (iii) necessary court approvals, and (iv)
certain termination rights available to the parties under the
Agreement. These approvals may not be obtained, the other
conditions to the Transaction may not be satisfied in accordance
with their terms, and/or the parties to the Agreement may exercise
their termination rights, in which case the Transaction could be
modified, restructured or terminated, as applicable. The
forward-looking statements in this news release are made as
of-the-date of this release. We undertake no obligation to comment
on expectations of, or statements made by third parties in respect
of the Transaction.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201020005788/en/
Terrace Global Inc. Francisco Ortiz von Bismarck, CEO and
Director E-mail: info@terraceglobal.ca Website:
www.terraceglobal.ca
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