By Eric Vengroff, Financial Analyst
Xanthic Biopharma Inc. dba Green Growth Brands Ltd.(CSE: GGB) announced today that it intends to make an offer to purchase all of the issued and outstanding common shares of Aphria Inc. (TSX: APHA and NYSE: APHA) which it does not already own.
The offer would give Aphria shareholders with 1.5714 common shares of Green Growth for each of their shares, a 45.5% over Aphria’s closing last Friday December 24th. At this price, the deal values Aphria at approximately C$2.8 billion (US$2.1 billion) based on a valuation of C$7.00 per share for GGB shares. GGB is trading up roughly 1.5% from its previous close this morning at C$5.05.
The company stated in their press release yesterday that Green Growth attempted to negotiate directly with Aphria’s board to secure a friendly deal, but it appears those overtures were rebuffed. It comes at a time when Aphria may be perceived as being particularly vulnerable to this kind of action by an opportunistic buyer. In addition to a general cooling of Canadian cannabis companies’ stock prices post-legalization in Canada, Aphria has lost roughly half its market capitalization in what was seen to be an orchestrated short-selling effort by Hindenburg Research, largely taking issue with Aphria’s Latin American investments. In a televised interview on BNN this morning, CEO Green Growth’s CEO, Peter Horvath, spoke enthusiastically about the intrinsic value of Aphria in terms of the scale and professionalism of Aphria’s operations and underlying business.
Green Growth, a 2018 startup which operates cannabis dispensaries in suburban Las Vegas under the name The Source and also states that it has wholesale to other dispensaries from its own production facility. The writer has personally visited The Source location on W. Sahara in Las Vegas while attending #MJBizCon in November and can confirm it is a competent and well-run outlet with some savvy marketing and presentation. Considering Mr. Horvath’s deep retail and fashion merchandising experience, this should come as no surprise. While the best-in-class award that management gave itself in their press release may not unwarranted, the operations of Planet 13, which also trades on the CSE, and also covered in the pages of CD, also runs a competent, profitable operation, with an absolutely beautiful facility in Las Vegas, so in this respect GGB doesn’t offer a particularly unique selling proposition. Green Growth is planning on introducing its own line of CBD products, initially focused on topicals and balms.
In an apparently unrelated announcement, Aphria announced that it has appointed Irwin D. Simon as independent Chair of Aphria’s Board of Directors, effective immediately. Vic Neufeld, the current Chair, will remain Aphria’s Chief Executive Officer and a director on Aphria’s Board.
Mr. Simon founded The Hain Celestial Group, Inc. in 1993. As Founder, President, Chief Executive Officer and Chairman, Mr. Simon lead Hain Celestial for 25 years, growing the business to approximately US$3.0 billion in net sales including operations in North America, Europe, Asia and the Middle East.