- Combination capitalizes on Nuuvera's expansive international
footprint, expanding network into Europe, Africa and the Middle East
- Transaction combines Aphria's low-cost, high quality
cultivation at scale with Nuuvera's expertise in cannabis
processing, and provides access to Nuuvera's state-of-the-art
testing and extraction facilities
- Expected be accretive to Aphria shareholders in first full
fiscal year after close on an earnings per share basis
- Brings together two strong management teams with highly
complementary expertise and international relationships
- Investment community conference call today at 9:30 a.m. ET (details below)
LEAMINGTON, ON and
TORONTO, Jan. 29, 2018 /CNW/
- Aphria Inc. ("Aphria" or the "Company") (TSX:
APH and US OTC: APHQF) and Nuuvera Inc. ("Nuuvera")
(TSXV:NUU), a leading, global cannabis company with a strong
presence in Europe, Africa and the Middle East, are pleased to announce that they
have entered into a definitive arrangement agreement (the
"Arrangement Agreement") pursuant to which Aphria will
acquire, by way of a court-approved plan of arrangement under the
Business Corporations Act (Ontario) (the "Transaction") 100% of
the issued and outstanding common shares (on a fully-diluted basis)
of Nuuvera. The combined company will leverage Nuuvera's extensive
international network and best-in-class manufacturing practices to
become the preeminent global supplier of premium cannabis. The
acquisition brings an already successful partnership between Aphria
and Nuuvera under the Aphria brand, reducing costs and providing
the potential to unlock greater economic value from future
production. The Transaction has been unanimously approved by the
Board of Directors of each of Aphria and Nuuvera and is supported
by the management teams of both companies as well as significant
shareholders of Nuuvera. The Transaction values Nuuvera at
approximately $826 million.
Transaction Rationale
- Creates the Global Leader in the International Medical
Cannabis Market: Aphria will leverage Nuuvera's numerous
relationships in Germany,
Italy, Spain, the United
Kingdom, Malta,
Israel, Lesotho and Uruguay. Combined with Aphria's existing
agreements in Australia, the
combined company establishes a leading international footprint
among Canadian licensed producers, and expands Aphria's processing
and manufacturing capabilities globally.
- Combines Complementary, Best-In-Class Core Competencies:
The acquisition of Nuuvera bolsters Aphria's recent accretive and
value-add transactions, including Broken Coast Cannabis, proud
producers of small-batch, premium-quality B.C. bud. Nuuvera's
expertise in extraction, distillation and processing of advanced
medical-grade derivative products supported by Aphria's low-cost,
high-quality cultivation to scale unlocks greater economic value
for the combined company. The acquisition expands upon the existing
strategic relationship between Aphria and Nuuvera, established
through multiple off-take agreements. As a result of the
transaction, Aphria will capture the retail margin of the 77,000 kg
of cannabis originally earmarked for these agreements. The combined
company will unlock greater economic value from future production,
including expectations of realizing supply chain efficiencies,
cross-selling and up-selling to customers through a broader product
portfolio, developing a more diverse customer base, integrating
operations and controls and implementing best practices.
- Adds Highly Experienced and Complementary Management
Team: Aphria will benefit from Nuuvera's highly-experienced,
global management team and the international expansion
opportunities it has secured at an accelerated pace. Nuuvera's
reputation for offering the highest quality in purified cannabinoid
products has set it apart from its competitors. The Nuuvera
management team will play a meaningful role within the combined
company going forward.
- Provides Access to State-of-the-Art Testing and Extraction
Facilities: The combined company, through Nuuvera, has access
to the only standalone Health Canada GMP-approved facility that is
authorized and dedicated under its controlled drugs and substances
licence to conduct commercial scale activities with respect to
cannabis and cannabinoids. This state-of-the-art medical laboratory
enables Nuuvera to maintain the highest standards by adhering to
both Health Canada and FDA pharmaceutical GMP guidelines, ensuring
product safety, quality, and efficacy.
"The combination of Aphria and Nuuvera creates a true global
leader in medical cannabis with excellent potential for growth and
value creation," said Vic Neufeld,
Chief Executive Office of Aphria. "This transaction, which builds
on a long-standing relationship between the two companies, brings
together our top tier ability to grow high-quality cannabis at a
low-cost with Nuuvera's expansive international network, expertise
in processing, and access to industry leading technology. I am
thrilled to welcome Nuuvera to the Aphria family and I am confident
they will play a significant role in our continued success."
Lorne Abony, CEO of Nuuvera,
said, "The transaction provides our shareholders with significant
value for their investment in Nuuvera and the opportunity to
participate in the significant upside of the combined company. As
part of Aphria, we will have access to every tool we need to open
key international markets and execute on our growth plan as part of
a stronger, well-resourced global cannabis leader."
Transaction Summary
Under the terms of the Arrangement Agreement, Aphria will
acquire all the issued and outstanding common shares (on a
fully-diluted basis) of Nuuvera for a total consideration of
$8.50 per Nuuvera share, representing
a total transaction value of approximately $826 million. Nuuvera shareholders will receive
$1.00 in cash plus 0.3546 of an
Aphria share for each Nuuvera share held which, based on Aphria's
10-day VWAP of $21.15 for the period
ended on January 26, 2018, equates to
$7.50 of value per Nuuvera share.
Aphria expects to issue up to approximately 34 million shares in
connection with the Transaction, representing approximately 20.8%
of the currently issued and outstanding shares of Aphria on a
non-fully diluted basis. The Transaction is expected to be
accretive to Aphria on an earnings basis in its first full fiscal
year.
The Transaction consideration of $8.50 per Nuuvera share represents a 30.5%
premium to Nuuvera's 10-day volume weighted average price of
$6.51 for the period ended on
January 26, 2018.
Upon closing of the Transaction, Nuuvera shareholders will own
approximately 14.8% of the combined company, assuming the closing
of Broken Coast Cannabis Inc.
The deal remains subject to certain other customary closing
conditions for the benefit of Aphria, including the conditional
approval of the TSX, applicable regulatory approvals and the
satisfaction of certain customary closing conditions.
The Transaction is subject to the approval of the Superior Court
of and is subject to the approval of two-thirds of the votes cast
by Nuuvera shareholders (as well as a majority of the "minority"
shareholders of Nuuvera), receipt of required regulatory approvals,
and other customary conditions of closing. Aphria has secured
irrevocable hard lock-ups (the "Lock-Ups") from shareholders
of Nuuvera to vote in favour of the Transaction, and also holds an
approximate 6.5% interest in Nuuvera. Collectively, the shares
subject to these Lock-Ups represent, together with the Nuuvera
shares already owned by Aphria, approximately 57% of the currently
outstanding Nuuvera shares, and over 50% of the "minority"
shareholders.
The Board of Directors of Nuuvera unanimously recommends that
Nuuvera shareholders vote in favour of the resolution to approve
plan of arrangement, which is expected to be subject to a special
meeting of shareholders held in March
2018. The Board of Directors of Nuuvera has obtained a
fairness opinion from Canaccord Genuity Corp. that, as of
January 28, 2018, and subject to the
assumptions, limitations and qualifications on which such opinions
are based, the consideration to be received by Nuuvera shareholders
is fair, from a financial point of view, to such shareholders
(other than Aphria). The Board of Directors of Aphria has received
an opinion from Cormark Securities that, as of January 28, 2018, and subject to the assumptions,
limitations and qualifications on which such opinions are based,
the consideration to be offered by Aphria is fair, from a financial
point of view, to Aphria.
The arrangement agreement between Nuuvera and Aphria provides
for, among other things, a non-solicitation covenant on the part of
Nuuvera, as well as a provision that entitles Nuuvera to consider a
superior proposal in certain circumstances, and a right in favour
of Aphria to match any superior proposal. Nuuvera is not permitted
to terminate the arrangement agreement as a result of a superior
proposal. If the arrangement agreement is terminated in certain
circumstances, including if Nuuvera enters into a definitive
agreement with respect to a superior proposal, Aphria is entitled
to a break-fee payment of $25
million. The Transaction is currently expected to close in
April 2018. The Transaction will not
impact the completion of the prospectus offering of units of
Nuuvera that was announced on January 24,
2018.
Further information regarding the transaction will be included
in Nuuvera's management information circular to be mailed to
Nuuvera shareholders in advance of the special meeting and in
Nuuvera'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 at www.sedar.com.
Financial and Legal Advisors
Clarus Securities Inc. provided strategic advice on the
transaction. Stoic Advisory Inc. acted as financial advisor and
Stikeman Elliott LLP acted as legal counsel to Aphria. Cormark
Securities Inc. is providing a fairness opinion to the Board of
Directors of Aphria.
Canaccord Genuity Corp. acted as financial advisor and Norton
Rose Fulbright Canada LLP acted as legal counsel to Nuuvera.
Canaccord Genuity Corp. provided a fairness opinion to the Special
Committee of the Board of Directors of Nuuvera.
Conference Call Information
Aphria and Nuuvera will hold a conference call on Monday, January 29, 2018 at 9:30 am EST to discuss the transaction.
Interested participants may take part by dialing (888) 231-8191. A
replay of this call will be available until March 1, 2018 by dialing (855) 859-2056 with the
passcode 9287699. The conference call is accompanied by an investor
deck which can be downloaded at aphria.com/investors.
We Have a Good Thing Growing.
About Aphria
Aphria Inc., one of Canada's
lowest cost producers, produces, supplies and sells medical
cannabis. Located in Leamington,
Ontario, the greenhouse capital of Canada. Aphria is truly powered by sunlight,
allowing for the most natural growing conditions available. Aphria
is committed to providing pharma-grade medical cannabis, superior
patient care while balancing patient economics and returns to
shareholders.
About Nuuvera
Nuuvera is a global cannabis company founded on Canadian
principles, and built with the whole world in mind. Nuuvera is
currently working with partners in Germany, Israel and Italy, and is exploring opportunities in
several other countries, to develop commercial production and
global distribution of medical grade cannabis in legalized markets.
Through its subsidiaries, ARA – Avanti Rx Analytics Inc. and Avalon
Pharmaceutical Inc., Nuuvera holds a Dealer License (GMP) under the
Narcotic Control Regulations and Office of Controlled Substances.
Nuuvera is currently in the final stages of the Health Canada
review process to become a Licensed Producer of medical marijuana
under the ACMPR, and has recently received its "letter to build"
approval.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: Certain
information in this news release constitutes forward-looking
statements under applicable securities laws. Any statements that
are contained in this news release that are not statements of
historical fact may be deemed to be forward-looking statements.
Forward looking statements are often identified by terms such as
"may", "should", "anticipate", "expect", "potential", "believe",
"intend" or the negative of these terms and similar expressions.
Forward-looking statements in this news release include, but are
not limited to, statements with respect to accretive earnings,
anticipated revenue and costs synergies associated with the
acquisition of Nuuvera, statements with respect to internal
expectations, estimated margins, expectations for future growing
capacity, costs and opportunities, the effect of the transaction on
the combined company and its strategy going forward, expectations
for receipt of licenses to cultivate, process or distribute medical
cannabis in Federally legal markets, the completion of any capital
project or expansions, the timing for the completion of the
Transaction and expectations with respect to future production
costs, the anticipated timing for the special meeting of
Nuuvera shareholders and closing of the transaction; the
consideration to be received by shareholders, which may fluctuate
in value due to Aphria common shares forming part of the
consideration; the satisfaction of closing conditions including,
without limitation (i) required Nuuvera shareholder approval; (ii)
necessary court approval in connection with the plan of
arrangement, (iii) certain termination rights available to the
parties under the arrangement agreement; (iv) Aphria obtaining the
necessary approvals from the Toronto Stock Exchange for the listing
of its common shares in connection with the Transaction; and (vi)
other closing conditions, including, without limitation, the
operation and performance of the Nuuvera business in the ordinary
course until closing of the Transaction and compliance by Nuuvera
with various covenants contained in the arrangement agreement. In
particular, there can be no assurance that the Transaction will be
completed. Forward looking statements are based on certain
assumptions regarding Nuuvera, including expected growth, results
of operations, performance, industry trends and growth
opportunities. While the Company considers these assumptions to be
reasonable, based on information currently available, they may
prove to be incorrect. Readers are cautioned not to place undue
reliance on forward-looking statements. Forward-looking statements
also necessarily involve known and unknown risks, including,
without limitation, risks associated with general economic
conditions; adverse industry events; marketing costs; loss of
markets; future legislative and regulatory developments involving
medical marijuana; inability to access sufficient capital from
internal and external sources, and/or inability to access
sufficient capital on favourable terms; the medical marijuana
industry in Canada generally,
income tax and regulatory matters; the ability of Aphria to
implement its business strategies; competition; crop failure;
currency and interest rate fluctuations and other risks. Any
forward-looking statements or facts (including financial
information) related to Nuuvera discussed or disclosed herein are
derived from information obtained directly from Nuuvera and
publicly available sources and has not been independently verified
by the Company.
Readers are cautioned that the foregoing list is not exhaustive.
Readers are further cautioned not to place undue reliance on
forward-looking statements as there can be no assurance that the
plans, intentions or expectations upon which they are placed will
occur. Such information, although considered reasonable by
management at the time of preparation, may prove to be incorrect
and actual results may differ materially from those
anticipated.
Forward-looking statements contained in this news release are
expressly qualified by this cautionary statement and reflect
our expectations as of the date hereof, and thus are subject to
change thereafter. We disclaim any intention or obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by law. This news release has been approved by the Board
of Directors of each of Aphria and Nuuvera. Factors that could
cause anticipated opportunities and actual results to differ
materially include, but are not limited to, matters referred to
above and elsewhere in our fiscal 2017 annual MD&A and the
material change report filed that will be filed in respect of this
Transaction, which are, or will be, available on SEDAR.
SOURCE Aphria Inc.