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LEAMINGTON, Ont. – Aphria Inc. (TSX: APHA) (Nasdaq: APHA), a number one world hashish firm inspiring and empowering the worldwide neighborhood to dwell their best possible life, at present introduced it has entered into an settlement of merger and acquisition (the “Agreement”) to purchase SW Brewing Company, LLC (“SweetWater Brewing Company” or “SweetWater”). SweetWater Brewing Company is among the largest impartial craft brewers within the United States (“U.S.”) based mostly on quantity. Beginning with the flagship 420 beverage choices, SweetWater has created an award-winning lineup of year-round, seasonal and specialty beers, a portfolio of manufacturers intently aligned with a hashish way of life. The roughly USD $300 million acquisition has been unanimously accepted by Aphria’s Board of Directors and is anticipated to shut earlier than the top of December 2020. Aphria expects this acquisition to be instantly accretive to EBITDA and diluted earnings per share. All greenback quantities within the press launch are expressed in U.S. {dollars}, except in any other case famous.

Founded in 1997 by Freddy Bensch, SweetWater has broad shopper enchantment and has established sturdy distribution throughout 27 states plus Washington, D.C. and has ample capability to help distribution efforts into new geographies, with restricted capital expenditure. From its state-of-the-art brewery in Atlanta, Georgia, SweetWater produces a balanced number of year-round and seasonal specialty craft brews, with SweetWater drinks out there in roughly 29,000 off-premise retail places starting from impartial bottle retailers to nationwide chains. SweetWater’s important on-premises enterprise permits shoppers to get pleasure from its varietals in additional than 10,000 eating places and bars.

In addition to its conventional distribution footprint, SweetWater 420 Extra Pale Ale and IPA are served on all Delta flights nationwide plus internationally totaling greater than 50 nations throughout six continents which has served to prolong SweetWater’s model attain on each a nationwide and worldwide degree. The Company additionally hosts an annual music pageant, “SweetWater 420 Fest,” that has developed into one of many largest and most anticipated music festivals within the U.S., growing model consciousness nationwide. In 2019, the 420 Strain G13 IPA grew to become the highest new craft model within the U.S. within the first 12 months after its launch. In addition to branding, SweetWater’s numerous 420 strains of craft brews use terpenes and pure hemp flavors that, when mixed with choose hops, emulate the flavors and aromas of well-liked hashish strains, to enchantment to a loyal shopper base that made the 420 Strain G13 IPA their #2 best-selling beer and #1 best-selling new craft beer within the U.S. For the yr ended December 31, 2019, SweetWater Brewing Company generated web income and adjusted EBITDA of $66.6 million and $22.1 million, respectively, and manufacturing quantity elevated 7% year-over-year to practically 261,000 barrels, twice the expansion fee of the craft beer market nationally, in accordance to the Brewers Association. 

“Our strong balance sheet and access to capital have enabled us to enter the U.S. through this strategic and accretive acquisition. We will establish and grow our U.S. presence through SweetWater’s robust, profitable platform of craft brewing innovation, manufacturing, marketing and distribution expertise. At the same time, we will build brand awareness for our adult-use cannabis brands, Broken Coast, Good Supply, Riff and Solei, through our participation in the growing $29 billion craft brew market in the U.S. ahead of potential future state or federal cannabis legalization,” mentioned Irwin D. Simon, Aphria’s Chairman and Chief Executive Officer. “We look forward to building upon the strengths of each of our respective and complementary brands, diversifying our product offering, broadening our consumer reach, and enhancing loyalty with consumers.” 

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“We are excited to welcome Freddy and the entire SweetWater team to the Aphria family,” continued Simon. “As a purpose-driven company, Aphria takes great pride in leading with our core values and is committed to changing people’s lives for the better by investing in our products, our people and our planet – a sentiment SweetWater completely shares with us.”

Freddy Bensch, SweetWater’s Founder and Chief Executive Officer, commented, “We are excited by the opportunity to join a leading global cannabis company and build a successful future based on the strengths we both bring to this combination. Our 420 brand offerings and SweetWater 420 Fest complement Aphria’s cannabis business and create mutual opportunities for accelerated expansion into other cannabis- and beverage-related products in the U.S. and Canada. We will leverage our growing beverage offering and build an even stronger, more diversified company with a continued focus on authentic and distinctive brands using some of the freshest, most flavorful ingredients to create innovative and high quality beverages including beers, seltzers, spirits and non-alcoholic beverages that our loyal and growing consumer base has come to expect from SweetWater.”

Strategic and Financial Benefits

In addition to buying a powerful model and accretive enterprise, this strategic acquisition positions Aphria with a platform and infrastructure inside the U.S. to allow it to entry the U.S. market extra rapidly within the occasion of federal legalization. The acquisition will create a bigger and extra diversified main world hashish firm. Aphria believes the mix will present a number of monetary and strategic advantages, together with the next:

Creates a Combined Branded Cannabis Lifestyle Products Company with Diversified Financial Position:

On a mixed foundation, Aphria and SweetWater may have roughly CAD $650 million to CAD $675 million of annualized pro-forma web income and roughly CAD $65 million to CAD $70 million of annualized pro-forma adjusted EBITDA. The acquisition is anticipated to additional diversify Aphria’s present web income combine, with the mixed hashish and distribution enterprise representing roughly 85 p.c of web income and the craft brewing and beverage enterprise representing roughly 15 p.c of web gross sales, based mostly on the professional forma web income. In addition, Aphria expects the acquisition to be margin accretive with SweetWater producing adjusted EBITDA margins effectively in extra of 30 p.c.

Generates Significant Cross-Selling Opportunities whereas Expanding Aphria’s Addressable Market in each the U.S. and Canada:

The mixture of Aphria’s current hashish enterprise with SweetWater’s craft brewing enterprise is anticipated to increase Aphria’s addressable market. According to Brewers Association, 2019 retail greenback gross sales of craft beer within the U.S. was $29.three billion. Aphria’s acquisition of SweetWater Brewing Company will present a strong, worthwhile platform for future progress and growth within the U.S. market.  Aphria believes the acquisition will place it to introduce and construct model consciousness of, and fairness in, its current adult-use hashish manufacturers Broken Coast, Good Supply, Riff and Solei within the U.S. by leveraging SweetWater Brewing Company’s manufacturing and distribution infrastructure.  The explosive progress of SweetWater’s Strain sequence, launched in 2018, showcases its cultivated fame for innovation, staying on the forefront of the business and present with craft and shopper tendencies.  Leveraging SweetWater’s innovation data and experience, Aphria plans to introduce its manufacturers by way of craft beers and different drinks in addition to different non-alcoholic merchandise because it seeks to benefit from alternatives for each the adult-use and well being and wellbeing beverage tendencies. Similarly, Aphria will likely be in a position to enter the Canadian beverage alcohol sector to distribute and promote SweetWater’s 420 model and different beverage choices in Canada. In addition, SweetWater’s innovation pipeline contains entry into the quickly rising laborious seltzer class, which is being fueled by millennials, an essential demographic.

Opportunity for Accelerated Entry into the U.S. Cannabis Market, Subject to Federal Legalization:

Aphria believes the acquisition of SweetWater is the cornerstone of its longer-term U.S. technique and an essential step in the direction of attaining its imaginative and prescient to change individuals’s lives for the higher by inspiring and empowering the worldwide neighborhood to dwell their best possible life.  SweetWater’s current infrastructure may be leveraged to speed up Aphria’s entry into the U.S. forward of federal legalization of hashish. The acquisition additionally gives the addition of key partnerships with main U.S. distributors, retailers and on-premises prospects strengthening Aphria’s means to develop new distribution within the U.S. for its merchandise.

Addition of an Experienced Executive Team: 

The acquisition will increase Aphria’s management group by way of the addition of SweetWater’s gifted group of executives who’ve substantial operational expertise within the craft brewing and beverage business and a confirmed observe report of creating, constructing and rising sturdy shopper manufacturers. SweetWater’s administration group will stay in place together with roughly 125 workers. Freddy Bensch will proceed as Chief Executive Officer of the wholly owned subsidiary, reporting straight to Irwin D. Simon, reflecting the dedication and perception of each corporations sooner or later success of the mixed firm. Freddy Bensch will enter right into a consulting settlement that may proceed till the top of calendar 2023, topic to renewals.

Agreement Details

Under the phrases of the Agreement, SweetWater will turn out to be an entirely owned subsidiary of Aphria. The unitholders of SweetWater will obtain $250 million in money and roughly $50 million in Aphria inventory at closing and are eligible to obtain up to $66 million of extra money below an earnout by way of the top of calendar yr 2023.  The preliminary transaction worth represents roughly 12.5x adjusted EBITDA a number of and it’s anticipated to shut earlier than the top of December 2020.

The Agreement accommodates customary phrases and circumstances for a transaction of this nature, together with representations and warranties of each Aphria and SweetWater, termination rights and customary closing circumstances, together with (i) HSR clearance (ii) no governmental authority shall have enacted any order prohibiting the completion of the acquisition, (iii) no materials antagonistic impact in respect of the SweetWater enterprise, and (iv) the accuracy of every celebration’s representations and warranties and every celebration’s materials compliance with its covenants and agreements contained within the Agreement.  For additional info on the phrases and circumstances of the acquisition, please refer to the whole Agreement out there on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Aphria expects to finance the money part of the acquisition value below the Agreement by way of (i) a dedicated $100 million time period debt facility on the SweetWater degree to be offered by sure of Aphria’s and SweetWater’s current lenders, (ii) accessing up to $100 million from its current $100 million At-The-Market (“ATM”) fairness program, and (iii) out there money available.  Aphria has enough money available to fund the acquisition.


About SweetWater Brewing Company
SweetWater Brewing Company has been in operation since 1997. The principal govt places of work of SweetWater Brewing Company are situated at 195 Ottley Drive, Atlanta, Georgia 30324. SweetWater Brewing Company’s web site is www.sweetwaterbrew.com.

Freddy Bensch, Founder of SweetWater, and his group have established the brewery into one of many largest impartial craft brewers within the United States. SweetWater manufactures and distributes bottled, canned and draft premium craft beers below the SweetWater model.

SweetWater Brewing Company has a state-of-the-art brewery and built-in restaurant and dwell music venue at its principal places of work in Atlanta, Georgia.  The 158,000 sq. foot constructing is leased, and the lease expires in 2040.  SweetWater obtains the substances utilized in its merchandise and the packaging for its merchandise from quite a lot of completely different sources and has not traditionally had any issue in securing an sufficient provide of substances or packaging for its merchandise.  The facility bottling and canning strains are able to packaging 23.5 million gallons of bottles yearly.  The facility additionally has kegging capability of 1.5 million kegs yearly.

SweetWater Brewing Company isn’t topic to any materials authorized or regulatory proceedings that would adversely have an effect on the operation of the enterprise.

About Aphria Inc.
Aphria Inc. is a number one world hashish firm inspiring and empowering the worldwide neighborhood to dwell their best possible life. Headquartered in Leamington, Ontario – the greenhouse capital of Canada – Aphria Inc. has been setting the usual for the low-cost manufacturing of high-quality hashish at scale, grown in essentially the most pure circumstances attainable. Focusing on untapped alternatives and backed by the newest applied sciences, Aphria Inc. is dedicated to bringing breakthrough innovation to the worldwide hashish market. The Company’s portfolio of manufacturers is grounded in expertly researched shopper insights designed to meet the wants of each shopper phase. Rooted in our founders’ multi-generational experience in industrial agriculture, Aphria Inc. drives sustainable long-term shareholder worth by way of a diversified strategy to innovation, strategic partnerships and world growth. For extra info, go to: aphriainc.com

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