CANADA: Canopy Growth Corporation and The Supreme Cannabis Company, Inc. are pleased to announce that they have entered into a definitive agreement under which Canopy will acquire all of the approximately $ 435 million issued and outstanding common stock of Supreme Cannabis completely diluted base.
Under the terms of the Agreement, Supreme Cannabis shareholders will receive 0.01165872 of one common share of Canopy (the “Exchange Ratio”) and $ 0.0001 in cash in consideration for each share of Supreme Cannabis held. The transaction offers Supreme Cannabis shareholders a premium per Supreme Cannabis share of approximately 66% based on the closing prices of Supreme Cannabis shares and Canopy common shares on the Toronto Stock Exchange (the “TSX”) as of April 7, 2021.
The transaction is expected to offer several benefits to both Canopy and Supreme Cannabis shareholders. Particularly after the acquisition is complete, Canopy will have a strengthened portfolio of brands including one of Canada’s leading premium brands, 7ACRES. Brand growth is expected as sales are supported by Canopy’s robust distribution network, as well as excellent customer knowledge and R&D skills. In addition to receiving a market premium, Supreme Cannabis shareholders will benefit from Canopy’s US CBD business and conditional positioning to continue to be affected by the US market expansion. Another value is provided by the scalable manufacturing facility in Kincardine, Ontario, which has a proven record of producing premium flowers at a low cost.
Important transaction highlights
- Solidifies Canopy’s leadership position in the Canadian leisure market, well positioned for growth: The transaction combines Canopy’s preeminent position with Supreme Cannabis’ top 10 position in Canada to create a pro forma market share in Canada for recreational activities of 6% (1) Top-5 in pre-rolled compounds (2).
- The combined pro forma market share of the premium flower segment is estimated at 23.3% in Ontario and 21.4% in British Columbia (3).
- Adds premium brands to Canopy’s portfolio: The addition of Supreme Cannabis’ premium brands, 7ACRES and 7ACRES Craft Collective, complements Canopy’s current consumer offering and will strengthen Canopy’s brand portfolio. Both brands are expected to grow further with further investments and expansions. Supreme Cannabis’s Blissco and Truverra brands expand Canopy’s presence in both the recreational and medical markets.
- Brings a world-class, affordable, and scalable cultivation facility to Canopy’s manufacturing capabilities: Supreme Cannabis’ hybrid greenhouse cultivation facility in Kincardine, Ontario has a proven ability to consistently produce premium bud from sought-after strains at low cost and with significant scaling potential.
- Secures an instant attractive bonus for Supreme Cannabis shareholders: The transaction offers Supreme Cannabis shareholders a premium per Supreme Cannabis share of approximately 66% based on the closing prices of Supreme Cannabis shares and Canopy common shares on the TSX as of April 7, 2021.
- Participation of Supreme Cannabis Shareholders in the Future of Canopy: Supreme Cannabis shareholders will receive Canopy common stock as part of the transaction and will have access to Canopy’s consumer insights, advanced research and development and innovation capabilities, and the ability to rapidly position themselves based on the company’s conditional positioning US market growth to participate market entry. Following the transaction, Canopy’s industry-leading balance sheet and cash position of approximately $ 2.5 billion will position the company for further expansion and product development.
- Opportunity to achieve potential cost synergies, valued at approx. 30 mm within two years: Canopy expects cost synergy opportunities following the transaction for both the cost of goods sold and distribution costs, as well as general and administrative expenses, as it optimizes and integrates Supreme’s operations and shared services.
“As we continue to expand our leading brand portfolio, we look forward to reaching more consumers through Supreme’s premium brands and high-quality products and further consolidating Canopy’s leadership,” said David Klein, Canopy’s chief executive officer. “Supreme’s deep commitment to superior genetics, world-class cultivation and strict quality control, coupled with Canopy’s leading customer insights, advanced research and development and innovation capabilities, is expected to create a powerful combination that aligns with our strategic focus on growth with the highest quality products.” matches across key categories. “
“This transaction is a testament to the value that all teams at Supreme have created and will benefit all of our stakeholders,” added Beena Goldenberg, President and CEO of Supreme Cannabis. “We have managed to deliver great products that achieve strong customer loyalty and operate with industry-leading levels of efficiency. With 7ACRES, we have also built a coveted premium brand. The combination of Supreme Cannabis with Canopy – a Canadian market leader with exposure to the US – offers both companies a significant value creation opportunity. We look forward to working with Canopy to complete this transaction. “
The transaction is being carried out under a court-approved draft agreement under the Canada Business Corporations Act, which requires the approval of at least two-thirds of the votes cast by Supreme Cannabis’ shareholders to vote at a special meeting of shareholders on the transaction is expected take place in June 2021. Canopy has entered into voting agreements with several directors and officers of Supreme Cannabis, according to which, among other things, they have agreed to vote their Supreme Cannabis shares in favor of the transaction.
In addition to shareholder and court approvals, the transaction is subject to applicable government approvals including, but not limited to, the approval and approval of the TSX under the Competition Act (Canada) and the satisfaction of certain other closing conditions customary in transactions of this type. The agreement contains customary provisions, including non-publicity, “trust,” and “right of compliance” provisions, as well as a termination fee of $ 12.5 million payable by Supreme Cannabis to Canopy in certain circumstances.
Assuming that all required approvals from courts, shareholders, regulators and other third parties are received in a timely manner and all other conditions are met, the transaction is expected to close by the end of June 2021.
A full description of the Transaction will be contained in Supreme Cannabis’ management information circular (the “Circular”) sent to Supreme Cannabis shareholders and filed with the Canadian Securities and Exchange Commission through the Electronic Documentation Analysis and Access System (“SEDAR”) www.sedar.com.
Approvals and recommendations
The transaction has been approved by the boards of Canopy and Supreme Cannabis, and the board of Supreme Cannabis recommends that Supreme Cannabis shareholders vote in favor of the transaction.
Each of BMO Capital Markets and Hyperion Capital submitted a statement to the Board of Directors of Cannabis dated April 7, 2021, according to which, at the time of that statement, the consideration payable under the transaction was a Financial View for the shareholders of Supreme Cannabis, each based on and subject to the respective assumptions, limitations, qualifications and other matters set out in such statements.
None of the securities to be issued in connection with the Transaction has been or will not be registered under the US Securities Act of 1933, as amended (the “US Securities Act”) or any state securities act, or with any securities that may be issued in connection with the Transaction. that they are issued in reference to any exemptions from such registration requirements available under Section 3 (a) (10) of the US Securities Act and applicable exemptions under state securities laws. This press release constitutes neither an offer to sell nor the solicitation of an offer to buy any securities.
Advisor and advisor
Cassels Brock & Blackwell LLP is acting as strategic and legal advisor to Canopy.
BMO Capital Markets is acting as exclusive financial advisor to Supreme Cannabis and has submitted a fairness opinion to the Board of Directors of Supreme Cannabis. Hyperion Capital Inc. has submitted an independent fairness opinion to the Supreme Cannabis Board of Directors. Borden Ladner Gervais LLP is acting as legal advisor to Supreme Cannabis.
- Source: Provincial Boards; Headset Note: This market share data differs from Canopy’s internal market share data provided on previous Canopy earnings views due to different methods and time periods. Market share data corresponds to October 1st, 20 using the latest available data: Provincial Board data for ON online, PEI, NS (March 27th, 28th 21st) and NB (March 17th, 21st); and headset data for ON Retail (02/28/21) as well as AB, BC and SK (03/31/21).
- Market share data corresponds to October 1st, 20 using the latest available data: Provincial Board data for ON online, PEI, NS (March 27th, 28th 21st) and NB (March 17th, 21st); and headset data for ON Retail (02/28/21) as well as AB, BC and SK (03/31/21).
- Estimation of growth management for internal canopies.
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