Aurora to Acquire up to a 40% Equity Interest
in Liquor Stores N.A.
TSX: ACB
TSX: LIQ
EDMONTON, Feb. 5, 2018 /CNW/ - Aurora Cannabis Inc.
("Aurora") (TSX:ACB) and Liquor Stores N.A. Ltd. ("Liquor
Stores") (TSX:LIQ) (collectively, the "Corporations")
announced today that Aurora has agreed to make a strategic
investment in Liquor Stores by way of a non-brokered private
placement (the "Private Placement").
The Private Placement has been structured in two phases, with an
Initial Investment made by Aurora (described further below) of
$103.5 million for an approximate
19.9% ownership interest in Liquor Stores, with an Additional
Investment (also described further below) that could bring Aurora's
interest in Liquor Stores up to approximately 40%.
Liquor Stores intends to use the net proceeds from the Private
Placement to establish and launch a leading brand of cannabis
retail outlets, whereby it will convert some number of Liquor
Stores' existing retail outlets into cannabis retail outlets and
establish new cannabis retail outlets. Liquor Stores will also use
a portion of the proceeds to continue to strengthen its existing
liquor retail brands by renovating existing liquor store outlets,
and also for general corporate purposes.
Together, the Corporations believe the benefits of the Private
Placement are significant for all shareholders. Aurora's brand
leadership, quality products, customer care, innovation and deep
product knowledge will be a strong complement to Liquor Stores'
well-established distribution network, best practices in the retail
of adult use controlled products, commitment to regulatory
compliance, and deep talent pool with over 2,000 retail employees.
The Corporations therefore believe that the Private Placement will
position Liquor Stores to establish a leading retail brand in the
cannabis sector, which is anticipated to be one of the strongest
growth markets in Canada's retail
sector.
"The Private Placement with Liquor Stores is transformational in
scale and scope for Aurora, Liquor Stores and the cannabis industry
in Canada, providing the
opportunity for our companies to establish a leading private retail
footprint in Western Canada" said
Terry Booth, CEO of Aurora.
"This is an extremely significant step in our corporate
development, as we prepare with our partners at Liquor Stores to
bring the Aurora Standard in product quality, customer care and
strategy execution to the pending legal consumer cannabis
market."
"We are thrilled that our two great Alberta-based companies have joined forces and
we are honoured that Aurora has selected Liquor Stores, through its
investment, as the retailer poised to establish a leading cannabis
brand in Western Canada" said
James Burns, CEO of Liquor
Stores.
Terms of the Private Placement – Initial Investment
Aurora will make an initial $103.5
million investment in Liquor Stores by subscribing for 6.9
million common shares (the "Shares") at a price of
$15.00 per Share (the "Initial
Investment"). Upon completion of the Initial Investment,
Aurora will own approximately 19.9% of the Shares (on a non-diluted
basis). The Initial Investment will not require approval of Liquor
Stores' shareholders and is expected to close on or about
February 14, 2018. The
subscription price of $15.00 per
Share represents a 24% premium to the five-day volume weighted
average trading price of the Common Shares on the Toronto Stock
Exchange (the "TSX") as of February
2, 2018.
Additional Investment
In addition, Aurora will subscribe for 2.3 million subscription
receipts of Liquor Stores (the "Subscription Receipts") at a
price of $15.00 per Subscription
Receipt for aggregate proceeds of $34.5
million. Upon receiving approval from Liquor Stores'
shareholders (other than Aurora) at its next annual general meeting
and the satisfaction of the other escrow release conditions, the
proceeds from the sale of Subscription Receipts will be released to
Liquor Stores and Aurora will increase its ownership of Shares to
approximately 25% (on a non-diluted basis).
Liquor Stores will also issue to Aurora, for no additional
consideration, two classes of Share purchase warrants: (1)
10,130,00 warrants at an exercise price of $15.75 per Share to allow Aurora to increase its
pro rata equity interest in Liquor Stores to 40% on a fully diluted
basis (the "Sunshine Warrants"); and (2) up to 1,750,000
warrants exercisable by Aurora at an exercise price of $15.00 upon any conversion of any of the
outstanding 4.70% convertible unsecured subordinated debentures of
Liquor Stores to allow Aurora to maintain its pro rata equity
interest in Liquor Stores (the "Pro Rata Warrants", and
together with the Subscription Receipts and the Sunshine Warrants,
the "Additional Investment"). The exercise of each of the
Sunshine Warrants and the Pro Rata Warrants will be conditional
upon the approval of Liquor Stores shareholders (other than Aurora
and its associates or affiliates) at the next annual general
meeting of Liquor Stores.
The TSX has conditionally approved the listing of the Shares
issuable pursuant to the Initial Investment and the issuance of the
Subscription Receipts, Sunshine Warrants and Pro Rata Warrants
pursuant to the Additional Investment. The TSX's conditional
approval is subject to a number of conditions, including
shareholder approval of the Additional Investment as a result of
its material effect on control and dilution.
The Private Placement is subject to customary closing
conditions, including the final approval of the TSX and is not
subject to any financing or due diligence conditions.
Completion of the Additional Investment will also be subject to the
receipt of required approvals under the Competition Act
(Canada).
None of the Subscription Receipts, Sunshine Warrants nor the Pro
Rata Warrants will be transferable by Aurora and will not be listed
for trading on the TSX. If approved by the Liquor Stores'
shareholders, it is anticipated that the Additional Investment by
Aurora would close shortly after the required shareholders'
meeting.
The Shares, Subscription Receipts, Sunshine Warrants and the Pro
Rata Warrants will each be subject to a hold period that will
expire four months and one day after the closing of the Private
Placement. The parties have agreed that the Shares issued
pursuant to the Private Placement as well as any Shares issuable
pursuant to the conversion of the Subscription Receipts or the
exercise of the Sunshine Warrants or the Pro Rata Warrants will be
subject to a contractual escrow of twelve (12) months from the
closing date of the Private Placement. The Shares will not be
registered in the United States.
Other Material Agreements
The Corporations have also entered into an Investor Rights
Agreement pursuant to which: (i) Aurora shall be entitled to
participate in future equity offerings of Liquor Stores in order to
maintain its pro rata equity interest in Liquor Stores; (ii) Aurora
shall have the right to nominate one (1) director for election to
the board of directors of Liquor Stores following the completion of
the Initial Investment (and subject to it maintaining an equity
ownership of at least 10% in Liquor Stores) and shall have the
right to nominate a second director if it increases its equity
ownership of Liquor Stores to 33 1/3% or more; (iii) Aurora shall,
in certain circumstances, be granted demand and piggy-back
registration rights; (iv) Aurora has agreed to a 12 month
standstill from the closing date of the Initial Investment and a 12
month restriction on any dispositions of the securities acquired
pursuant to the Private Placement; and (v) the Corporations have
agreed to take certain actions in furtherance of the development of
a retail cannabis business together with limitations on certain
transactions that Liquor Stores can undertake until the shareholder
meeting.
Liquor Stores Board Recommendation
The board of directors of Liquor Stores (the "Board")
appointed a special committee of independent directors comprised of
Ms. Karen Prentice (chair),
John Barnett and Derek Burney (the "Independent
Committee") to review and approve the Private Placement.
The Independent Committee, together with its legal and financial
advisors, has determined that the Private Placement is in the best
interests of Liquor Stores and recommended its approval to the
Board. The Board, after considering, among other things, the
report and recommendation of the Independent Committee, approved
the Private Placement and recommends that shareholders vote in
favour of the Additional Investment.
Advisors
Eight Capital acted as Aurora's exclusive financial advisor in
connection with the Private Placement. The Independent Committee
obtained a fairness opinion dated as of February 4, 2018 from its financial advisor,
Paradigm Capital Inc., that, based upon and subject to the
limitations and qualifications therein, the terms of the Private
Placement are fair, from a financial point of view, to Liquor
Stores.
About Aurora Cannabis Inc.
Aurora's wholly-owned subsidiary, Aurora Cannabis Enterprises
Inc., is a licensed producer of medical cannabis pursuant to Health
Canada's Access to Cannabis for Medical Purposes Regulations
("ACMPR"). The Company operates a 55,200 square foot
production facility in Mountain View County, Alberta, known as "Aurora Mountain", a 40,000
square foot production facility known as "Aurora Vie" in
Pointe-Claire, Quebec, and an
800,000 square foot production facility, known as "Aurora Sky", at
the Edmonton International
Airport. Aurora is also completing a fourth facility of 48,000
square feet in Lachute, Quebec,
and will shortly begin construction on a 1,000,000 square foot
production facility in Odense,
Denmark, to be known as "Aurora Nordic", via a joint venture
with Alfred Pedersen & Søn
ApS.
Aurora also owns Berlin-based
Pedanios GmbH, the leading wholesale importer, exporter, and
distributor of medical cannabis in the European Union. The Company
offers further differentiation through its wholly owned
subsidiaries BC Northern Lights Ltd. and Urban Cultivator Inc.,
industry leaders, respectively, in the production and sale of
proprietary systems for the safe, efficient and high-yield indoor
cultivation of cannabis, and in state-of-the-art indoor gardening
appliances for the cultivation of organic microgreens, vegetables
and herbs in home and professional kitchens.
In addition, the Company holds approximately 17.23% of the
issued shares in leading extraction technology company Radient
Technologies Inc., and has a strategic investment in Hempco Food
and Fiber Inc., with options to increase ownership stake to over
50%. Aurora is also the cornerstone investor in two other licensed
producers, with a 22.9% stake in Cann Group Limited, the first
Australian company licensed to conduct research on and cultivate
medical cannabis, and a 17.62% stake in Canadian producer The Green
Organic Dutchman Ltd., with options to increase to majority
ownership.
Aurora's common shares trade on the TSX under the symbol
"ACB".
About Liquor Stores N.A. Ltd.
Liquor Stores operates 231 retail liquor stores. Liquor Stores'
common shares and convertible subordinated debentures trade on the
Toronto Stock Exchange under the symbols "LIQ" and "LIQ.DB.B",
respectively.
Additional information about Liquor Stores N.A. Ltd. is
available at www.sedar.com and its website at
www.liquorstoresna.ca.
Forward-Looking Statements
This press release contains information that constitutes
"forward-looking information" or "forward-looking statements"
(collectively, "forward-looking information") within the meaning of
applicable securities legislation. The use of any of the words
"believe", "continue", "create", "deliver", "expect", "provide",
"will" and similar expressions are intended to identify
forward-looking information. Forward-looking information includes
statements concerning: the use of the net proceeds from the Private
Placement; the anticipated benefits of the Private Placement to
Liquor Stores, Aurora and their respective shareholders, including
Liquor Stores' ability to establish a retail cannabis business; the
anticipated growth of a cannabis retail business in Canada and anticipated market share;
regulatory risks, including risks related to the ability of, and
expected timing for, Liquor Stores' and Aurora's participation in
the retail adult use market for cannabis in Canada; the timing and anticipated receipt of
required government, regulatory and shareholder approvals for the
Private Placement; the ability of Liquor Stores and Aurora to
satisfy the other conditions to, and to complete, the Private
Placement; and the timing of the annual general meeting of the
shareholders of Liquor Stores and the closing of the Private
Placement.
In respect of the forward-looking statements and information
concerning the anticipated completion and benefits of the proposed
Private Placement and the anticipated timing for completion of the
Private Placement, Liquor Stores and Aurora have provided such in
reliance on certain assumptions that they believe are reasonable at
this time, including assumptions as to the implementation of
legislation and a regulatory regime in respect of cannabis that
will permit Liquor Stores to establish a retail cannabis business;
that under applicable laws or rules in respect of cannabis Aurora
and its affiliates will be permitted to own securities of Liquor
Stores and take certain actions with Liquor Stores in furtherance
of the development of a retail cannabis business together; the
time required to prepare and mail Liquor Stores shareholder meeting
materials, including the required information circular; the ability
of the parties to receive, in a timely manner, the required
government, regulatory, shareholder and other third party approvals
required to complete the Private Placement and participate in the
retail adult use market for cannabis in Canada; the assets and employees of Liquor
Stores and Aurora; the plans of Liquor Stores to establish cannabis
retail outlets; and the ability of the parties to satisfy, in a
timely manner, the other conditions to the closing of the Private
Placement. Dates may change for a number of reasons, including
unforeseen delays in preparing meeting materials, inability to
secure necessary government, regulatory, shareholder or other third
party approvals in the time assumed or the need for additional time
to satisfy the other conditions to the completion of the Private
Placement. In general, actual outcomes may vary from the
forward-looking information contained in this press release.
Accordingly, readers should not place undue reliance on the
forward-looking statements and information contained in this press
release.
Since forward-looking information addresses future events and
conditions, by its very nature it involves inherent risks and
uncertainties. Risks and uncertainties inherent in the Private
Placement include, but are not limited to, the failure of Liquor
Stores or Aurora to obtain necessary government, regulatory,
shareholder and other third party approvals, or to otherwise
satisfy the conditions to complete the Private Placement and
participate in the retail adult use market for cannabis in
Canada, in a timely manner, or at
all; and the failure to successfully execute the plans regarding a
retail cannabis business. The failure to obtain approvals, or the
failure of Liquor Stores or Aurora to otherwise satisfy the
conditions to the Private Placement, may result in the Private
Placement not being completed on the proposed terms, or at all.
Readers are cautioned that the foregoing list of risk factors is
not exhaustive. Additional information on other factors that could
affect the operations or financial results of Liquor Stores and
Aurora are included in reports on file with applicable securities
regulatory authorities, including but not limited to: Liquor
Stores' Annual Information Form for the year ended December 31, 2016 dated March 29, 2017 and Aurora's Annual Information
Form for the year ended June 30, 2017
dated September 25, 2017, as well as
subsequent reports which may be filed from time to time, which may
be accessed on Liquor Stores' and Aurora's respective company
profiles on SEDAR at www.sedar.com.
The forward-looking information contained in this press release
is made as of the date hereof and Liquor Stores and Aurora
undertake no obligation to update publicly or revise any
forward-looking information, whether as a result of new
information, future events or otherwise, unless so required by
applicable securities legislation.
SOURCE Aurora Cannabis Inc.