Canopy Growth can pay Acreage shareholders and sure convertible safety holders an mixture of US$37,500,000 (roughly US$0.30 per Existing Share

The preliminary  deal was valued at roughly $3.four billion, making it the priciest M&A transaction within the hashish trade on the time in accordance with MJ Biz

But issues have gone south considerably with MJ Biz saying…..

All informed, the brand new deal, introduced Thursday, might worth Acreage’s fairness at about $900 million, Cowen analyst Vivien Azer wrote in a analysis notice.

The lower cost displays the droop in hashish trade shares and Acreage’s present monetary troubles.

 

Here’s the press launch in full

Canopy Growth and Acreage comply with amend plan of association to offer potential further upside for all shareholders

Amended association supplies for up-front money fee to Acreage shareholders and sure convertible safety holders within the mixture quantity of US$37,500,000

Amended association creates two lessons of Acreage shares, together with a brand new floating share that gives upside alternative for Acreage shareholders that isn’t tied to mounted alternate ratio

Provides capital for Hemp operations, permitting Acreage to take part within the burgeoning CBD market

SMITHS FALLS, ON and NEW YORKJune 25, 2020 /CNW/ – Canopy Growth Corporation (“Canopy Growth”) (TSX: WEED) (NYSE: CGC) and Acreage Holdings, Inc. (“Acreage”) (CSE: ACRG.U) (OTCQX: ACRGF) (FSE: 0VZ), at present introduced they’ve entered into an settlement (the “New Agreement”) to amend the phrases of the association settlement dated April 18, 2019, as amended on May 15, 2019, between Canopy Growth and Acreage (the “Arrangement Agreement”).

Pursuant to the Arrangement Agreement, Canopy Growth agreed to amass the entire issued and excellent securities of Acreage pursuant to a plan of association underneath the Business Corporations Act (British Columbia) (the “Plan of Arrangement”), contingent upon the prevalence of adjustments in U.S. federal legislation to allow the overall cultivation, distribution, and possession of marijuana (the “Triggering Event”) and topic to the satisfaction or waiver of sure situations to closing as set out within the Arrangement Agreement.

Acreage and Canopy Growth entered into the New Agreement to higher align the phrases of the Plan of Arrangement with broader market and financial elements, present Acreage shareholders with an preliminary up-front fee in reference to the modification of Canopy Growth’s rights, together with the extension of the time period, and provides Acreage shareholders the flexibility to take part in upside potential upon the Triggering Event.

KEY TRANSACTION HIGHLIGHTS & BENEFITS:

  • Provides Up-Front Cash Payment. Canopy Growth can pay Acreage shareholders and sure convertible safety holders an mixture of US$37,500,000 (roughly US$0.30 per Existing Share (outlined beneath) on an as transformed foundation, with the ultimate quantity to be obtained by every holder decided based mostly on the variety of Existing Shares into which the entire eligible securities are convertible on the shut of enterprise on the report date for the distribution).
  • Attractive Valuation Premium. Acreage shareholders’ new Fixed Shares (outlined beneath), every of which represents 70% of an Existing Share, will probably be entitled to obtain 0.3048 of a Canopy Growth Share (outlined beneath) for every Fixed Share held, representing a premium of roughly 120% to the June 24, 2020 closing worth of the Existing Shares (outlined beneath) on the Canadian Securities Exchange (the “CSE”).
  • Provides Potential Upside with Floating Shares. Acreage shareholders will probably be entitled to take part within the long-term worth created by Acreage, and within the U.S. hashish trade typically, because of the Floating Shares (outlined beneath) which Canopy Growth could purchase sooner or later upon the prevalence or waiver of the Triggering Event at a worth based mostly upon the 30-day volume-weighted common buying and selling worth of the Floating Shares on the CSE relative to the buying and selling worth of the Canopy Growth Shares on the NYSE at the moment, topic to a minimal of US$6.41 per Floating Share.
  • Alignment with Economic and Financial Market Conditions. Considering the difficult financial surroundings and more and more tighter and risky monetary market situations, notably for hashish firms, Acreage decided that the New Arrangement represents one of the best accessible prospect that’s compliant with the phrases of the Arrangement Agreement to maximise potential worth for Acreage shareholders.

The United States is going to be a core market for Canopy Growth and this New Agreement solidifies our path forward with Acreage,” stated David Klein, Chief Executive Officer of Canopy Growth. “I am excited to bring our relationship with Acreage back to centre stage in our U.S. strategy and look forward to a time when the laws in the United States permit us to finalize this transaction as we march toward bringing our exciting beverage products to the US.”

Table 1. Implied Value of Acreage Stock Upon Trigger Event

1. Fixed Share = CGC Share Price X Exchange Ratio

CGC Share Price 

$       16.71

* Closing Price, June 24, 2020

Exchange Ratio 

0.3048

———-

Value of Fixed Share

$         5.09

2. Value of Floating Share = Higher of Market Price or $6.41 Per Share

Assume Minimum Floating Value 1

$         6.41

3. Value to Current ACRG Shareholders = 0.7X Value of Fixed Share + 0.3X Value of Floating Share

ACRG Share Class

 # of Share 

Price

Value

Current Shares (SVS)

1

$         2.32

$         2.32

Fixed Share (0.3048 Exchange Ratio)

0.7

$         5.09

$         3.57

Floating Share (Assume $6.41)

0.3

$         6.41

$         1.92

Value Per Current ACRG Share

$         5.49

Current ACRG Share worth

$         2.32

% Upside from Current ACRG Price 

137%

$6.41 Minimum Floating Share worth applies provided that CGC chooses to train the decision provision phrases as written within the amended settlement

TERMS OF THE NEW ARRANGEMENT

Under the phrases of the New Agreement, topic to acquiring the requisite approvals as outlined beneath, the Plan of Arrangement will probably be amended (the “New Arrangement”) with a purpose to present for the next:

  • an up-front cash-payment to Acreage shareholders and sure convertible safety holders within the mixture quantity of US$37,500,000 (roughly US$0.30 per Existing Share on an as transformed foundation, with the ultimate quantity to be obtained by every holder decided based mostly on the variety of Existing Shares into which the entire eligible securities are convertible on the shut of enterprise on the report date for the distribution);
  • the creation of two new lessons of shares within the capital of Acreage with every current Acreage subordinate voting share (an “Existing Share”) being transformed into 0.7 of a Fixed Share and 0.Three of a Floating Share (with proportionate changes for the prevailing proportionate voting shares and current a number of voting shares);
  • the brand new subordinate voting shares (the “Fixed Shares”) may have the identical attributes because the Existing Shares and can proceed to be listed on the CSE. The Fixed Shares will probably be topic to the phrases of the prevailing name choice in favour of Canopy Growth at an amended alternate ratio equal to 0.3048 (decreased from 0.5818 per current full Subordinate Voting Share within the Arrangement Agreement) of a standard share of Canopy Growth (every entire frequent share, a “Canopy Growth Share”) to be obtained for every Fixed Share held, representing a premium, if Canopy Growth acquired the Fixed Shares as on the date hereof, of roughly 120% to the closing worth of the Existing Shares on June 24, 2020;
  • the brand new floating shares (the “Floating Shares”), which Acreage will apply to have listed on the CSE, will probably be topic to the phrases of a brand new name proper in favour of Canopy Growth, exercisable following the prevalence or waiver of the Triggering Event at a worth equal to the 30-day quantity weighted common buying and selling worth of the Floating Shares on the CSE, topic to a minimal name worth of US$6.41 per Floating Share, payable in both money or Canopy Growth Shares at Canopy Growth’s choice. If Canopy Growth doesn’t train its choice to amass the Floating Shares earlier than it expires, the minimal worth will now not be legitimate and the Floating Shares will proceed to commerce on the CSE;
  • an mixture share pool of as much as 32,700,000 Fixed Shares and Floating Shares that enables for continued capital raises in addition to share-based incentive compensation.

Following the prevalence of the Triggering Event and topic to the satisfaction or waiver of the situations set out within the Arrangement Agreement (as modified by the New Agreement and together with the revised covenants contained therein with respect to the enterprise of Acreage), Canopy Growth will purchase the entire issued and excellent Fixed Shares of Acreage to kind a pre-eminent international hashish firm, which is predicted to create long-term worth for shareholders. At such time, Canopy Growth may also have the proper, however not the duty, to amass the entire issued and excellent Floating Shares.  If the Triggering Event doesn’t happen inside 10 years from the date the New Arrangement is carried out, Canopy Growth’s rights to amass each the Fixed Shares and Floating Shares will terminate.

LEADERSHIP TRANSITION

In reference to the implementation of the New Arrangement, Kevin Murphy has introduced at present that he’s resigning as Chief Executive Officer of Acreage and a seek for his successor will begin instantly.

Mr. Murphy will proceed to behave as Chairman of the board of administrators of Acreage (the “Acreage Board”) and contribute to the strategic route of the corporate. Director Bill Van Faasen, former Chairman, CEO and President of The Blue Cross Blue Shield of Massachusetts, will function Acreage’s Interim Chief Executive Officer till a everlasting alternative has been recognized.

“On behalf of the entire Acreage Board, I sincerely thank Kevin for his passion and commitment to building a leading cannabis enterprise across the United States,” stated Douglas Maine, Chair of the Acreage Special Committee. “Kevin is a visionary entrepreneur and positioned Acreage for success in the U.S. cannabis industry. As we move forward with a renewed commitment by Canopy Growth and build upon the vision for the U.S., we are optimistic about the long-term growth prospects for our shareholders.”

“I am excited about this New Agreement and the creation of a pre-eminent and truly global cannabis company upon the occurrence of the Triggering Event. I believe the eventual federal permissibility of cannabis in the United States is inevitable and this New Agreement continues to allow our shareholders to become a part of a leading cannabis company following such changes. Moreover, as the largest shareholder of Acreage, I believe this New Arrangement allows all Acreage shareholders to participate in potential upside to their investments through the fixed exchange component of Canopy Growth stock and importantly the new Floating Shares” stated Kevin Murphy, Chair of the Acreage Board.

CORPORATE UPDATES

As the hashish sector in the United States continues to develop, Acreage will proceed to focus its operations on its core worthwhile markets. In pursuit of progress alternatives in these markets, following the date of the New Agreement, Acreage will probably be permitted to problem as much as 32,700,000 Shares, comprised of as much as 12,400,000 Floating Shares (together with 3,700,000 Floating Shares for share-based incentive compensation) and as much as 20,300,000 Fixed Shares.

THE LOAN

In reference to the New Agreement, Canopy Growth has agreed to mortgage an entirely owned subsidiary of Acreage (“Acreage Hempco”), as much as US$100 million pursuant to a secured debenture (the “Debenture”).  Canopy Growth will mortgage Acreage Hempco an preliminary US$50 million on and topic to completion of the New Arrangement.  The remaining US$50 million will probably be topic to the satisfaction of sure situations by Acreage Hempco. The Debenture will bear curiosity at a price of 6.1% each year. The Debenture will mature 10 years from the date the New Arrangement is carried out or such earlier date in accordance with the phrases of the Debenture and all curiosity funds made pursuant to the Debenture are payable in money by Acreage Hempco. The Debenture shouldn’t be convertible and isn’t assured by Acreage. The internet proceeds are anticipated for use by Acreage Hempco for basic company functions and the funding of its U.S. hemp division. The funds can’t be used, instantly or not directly, in reference to or for any hashish or cannabis-related operations in the United States, until and till such operations adjust to all relevant legal guidelines of the United States.

REQUIRED APPROVALS

The New Arrangement would require approval by holders of at the very least 66⅔% of the Existing Shares current in individual or represented by proxy, voting collectively as a single class at a particular assembly anticipated to happen in August 2020 (the “Meeting”). Additionally, pursuant to: (i) Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions, the New Agreement requires approval by a majority of disinterested holders of the Existing Shares current in individual or represented by proxy on the Meeting; and (ii) OSC Rule 56-501 – Restricted Shares (“56-501”), “minority approval” (as such time period is outlined therein) is required for the creation and distribution of the Fixed Shares and Floating Shares, which will probably be thought of “restricted securities” throughout the that means of 56-501. Certain administrators and officers of Acreage holding roughly 84.6% of the voting rights hooked up to the Existing Shares have entered into voting assist agreements pursuant to which they’ve agreed, amongst different issues, to vote in favor of the decision to approve the New Arrangement. In addition to shareholder approval, the New Arrangement is topic to relevant approvals by the Supreme Court of British Columbia and the CSE and sure different regulatory and shutting situations. Listing of the Fixed Shares and Floating Shares will probably be topic to satisfaction of the CSE’s itemizing necessities.

ACREAGE BOARD RECOMMENDATION

The Acreage Board, on the unanimous advice of a particular committee of unbiased administrators of Acreage (the “Acreage Special Committee”), has unanimously accepted the New Agreement and recommends that Acreage shareholders vote in favour of the decision to approve the New Arrangement.

In reference to making its advice to the Acreage Board, the Acreage Special Committee obtained a equity opinion from Eight Capital that, as of the date of the opinion, and topic to the assumptions, limitations, and {qualifications} on which such opinion is predicated, the consideration to be obtained by Acreage shareholders pursuant to the New Arrangement is truthful, from a monetary viewpoint, to the Acreage shareholders.

ADVISORS

Cassels Brock & Blackwell LLP and Paul Hastings LLP acted as authorized counsel to Canopy Growth. Ernst & Young LLP (EY) acted as tax advisors to Canopy Growth. DLA Piper (Canada) LLP and Cozen O’Connor acted as authorized counsel to Acreage. Foros acted as monetary advisor to the Acreage Board and Eight Capital acted as monetary advisor to the Acreage Special Committee.  Wildeboer Dellelce LLP acted as authorized counsel to the Acreage Special Committee.

Additional particulars will probably be supplied to Acreage shareholders within the proxy assertion to be mailed to Acreage shareholders in reference to the Meeting.

Here’s to Future Growth.

About Canopy Growth Corporation
Canopy Growth (TSX:WEED, NYSE:CGC) is a world-leading diversified hashish, hemp and hashish system firm, providing distinct manufacturers and curated hashish varieties in dried, oil and Softgel capsule varieties, in addition to medical units by means of Canopy Growth’s subsidiary, Storz & Bickel GMbH & Co. KG. From product and course of innovation to market execution, Canopy Growth is pushed by a ardour for management and a dedication to constructing a world-class hashish firm one product, web site and nation at a time.

Canopy Growth’s medical division, Spectrum Therapeutics, is proudly devoted to educating healthcare practitioners, conducting sturdy scientific analysis, and furthering the general public’s understanding of hashish, and has devoted hundreds of thousands of {dollars} towards cutting-edge, commercializable analysis and IP improvement. Spectrum Therapeutics sells a spread of full-spectrum merchandise utilizing its colour-coded classification Spectrum system in addition to single cannabinoid Dronabinol underneath the model Bionorica Ethics.

Canopy Growth operates retail shops throughout Canada underneath its award-winning Tweed and Tokyo Smoke banners. Tweed is a globally acknowledged hashish model which has constructed a big and constant following by specializing in high quality merchandise and significant buyer relationships.

From our historic public itemizing on the Toronto Stock Exchange and New York Stock Exchange to our continued worldwide growth, satisfaction in advancing shareholder worth by means of management is engrained in all we do at Canopy Growth. Canopy Growth has established partnerships with main sector names together with hashish icons Snoop Dogg and Seth Rogen, breeding legends DNA Genetics and Green House Seeds, and Fortune 500 alcohol chief Constellation Brands, to call however a number of. For extra data go to www.canopygrowth.com.

About Acreage Holdings, Inc. 
Headquartered in New York City, Acreage is a vertically built-in, multi-state operator of hashish licenses and property within the U.S.. Acreage is devoted to constructing and scaling operations to create a seamless, consumer-focused branded hashish expertise. Acreage debuted its nationwide retail retailer model, The Botanist in 2018 and its award-winning client manufacturers, The Botanist and Live Resin Project in 2019.

Pursuant to the present Plan of Arrangement, the Acreage articles had been amended to offer Canopy Growth with an choice to amass the entire Existing Shares, with a requirement to take action, upon the prevalence or waiver of the Triggering Event, topic to the satisfaction or waiver of the situations set out within the Arrangement Agreement. Acreage continues to function as a stand-alone entity and conducts its enterprise independently, topic to compliance with sure covenants contained within the Arrangement Agreement. Pursuant to the present Plan of Arrangement, upon the prevalence or waiver of the Triggering Event, Canopy Growth will, topic to the satisfaction or waiver of sure situations to closing set out within the Arrangement Agreement, purchase (the “Acquisition”) every of the Existing Shares (following the automated conversion of the Class B proportionate voting shares and Class C a number of voting shares of Acreage into Existing Shares) in alternate for the fee of 0.5818 of a Canopy Growth Share per Existing Share (topic to adjustment in accordance with the phrases of the Arrangement Agreement), till such time as amended in accordance with the New Arrangement. For extra details about the present Plan of Arrangement and the Acquisition please see the respective data circulars of every of Acreage and Canopy Growth dated May 17, 2019, which can be found on Canopy Growth’s and Acreage’s respective profiles on SEDAR at www.sedar.com.

 

https://www.newswire.ca/news-releases/canopy-growth-amp-acreage-holdings-agree-to-modify-plan-of-arrangement-as-canopy-growth-s-u-s-expansion-continues-855654780.html?utm_medium=email&utm_source=newsletter&utm_campaign=MJD_20200625_News_Daily

 

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