After the initial divesture, Aphria maintains
28.1% interest in Liberty and 2 of 5 directors
LEAMINGTON, ON, Feb. 5, 2018 /CNW/ - Aphria Inc.
("Aphria" or the "Company") (TSX: APH or
USOTCQB: APHQF) today announced that it entered into a
purchase and sale agreement to sell 26,716,025 shares representing
all its shares in Liberty Health Sciences Inc.. ("Liberty")
that are not subject to Canadian Securities Exchange ("CSE")
escrow requirements (the "Transaction"). Each of Michael
Serruya, Simon Serruya and Jack
Serruya are purchasing 80% of all transferred shares from
Aphria individually or through an affiliate. The remaining 20% is
being purchased by an affiliate of Delavaco Capital. The
Transaction also includes a call / put option ("Option
Agreement") for the remainder of the Company's shares, which
are currently subject to the CSE mandatory escrow requirements. Of
the total divested shares, 80% are being purchased by individual
members of the Serruya family, directly or through their
affiliates, and 20% are being purchased by affiliates of Delavaco
Capital owned and/or controlled by Catherine DeFrancesco. Each purchaser will also
sign a promissory note, together with a guarantee which guarantees
such purchaser's obligations under their promissory note and the
obligations of such purchaser upon the exercise of the applicable
call or put option, as the case may be, under the Option Agreement.
The Transaction remains subject to receipt of all required
approvals from the Florida Department of Health ("DOH")
Office of Medical Marijuana Use and the purchasers being approved
through the DOH's Level 2 screening process.
"The sale of a portion of our investment in Liberty Health
Sciences provides excellent returns for our investors and we are
committed to continue to work together with the Toronto Stock
Exchange to ensure compliance with its staff notice regarding US
cannabis investments", said Vic
Neufeld, Chief Executive Officer of Aphria. "While I
continue to believe there is tremendous opportunity in the U.S. for
medical cannabis, the sale of these shares serve the best interests
of our shareholders and provide additional and important capital to
fund Aphria's continued growth in Canada and expand into other federally legal
international markets."
After the Transaction, Aphria retains an ownership position of
28.1% of the issued and outstanding shares of Liberty. In addition,
Vic Neufeld and John Cervini, of Aphria, remain on Liberty's
board of directors, with Mr. Neufeld remaining as the Chair of the
Board. As part of the Transaction, Liberty retains the right to
continued use of Aphria's trademarks and perserves its interest in
the Aphria Know-How System.
"Liberty remains very well positioned to capitalize on
opportunities in the U.S. medical cannabis industry and Aphria has
received excellent value for its investment in this growing
company," said Neufeld. "Liberty's success is a testament to its
hard work and strong management team and we look forward to
watching their continued success as they forge ahead with their
growth plans in the U.S."
An independent special committee (the "Aphria Committee")
of the board of directors of Aphria (the "Aphria Board")
received a fairness opinion from Cormark Securities Inc.,
independent financial advisors to Aphria, that as of February 4, 2018, and subject to the assumptions,
limitations and qualifications on which such opinions are based,
the Transaction is fair from a financial point of view. The Aphria
Committee unanimously recommended the approval of the Transaction
to the Aphria Board. Subsequently, the Transaction and the
entering into of the purchase and sale agreement and other
transaction agreements were unanimously approved by the eligible
directors of the Aphria Board.
Transaction Details
The Company divested 26,716,025 shares in Liberty, at a price of
$1.25 per share, a discount of
approximately 12% to the market close on Friday, in exchange for
short-term notes for $33,395,031. The
short-term notes are non-interest bearing and due on February 26, 2018. As security for the notes,
each of the buyers provided the Company a guarantee.
The Transaction also includes a call / put option for the
remainder of the Company's shares, which are currently subject to
the CSE mandatory escrow requirements. As each new tranche of
shares becomes freely trading, the Option Agreement results in the
buyers acquiring the newly freely trading shares at an 18% discount
to the market price of Liberty, based on Liberty's 10 day volume
weighted trading price. As security for the Option Agreement, each
of the buyers provided the Company a guarantee.
The Transaction includes an opt-out for Aphria's benefit in the
event that the Toronto Stock Exchange ("TSX") amends their
regulations such that it permits U.S. based cannabis investments
and in such instance the Option Agreement would be automatically
terminated. In exchange for the opt-out, the Company agrees to pay
the buyers, on a pro rated basis, a $2.5
million termination fee.
The cost to Aphria of the divested shares was $0.234 per share, resulting in a gain to Aphria
of approximately $27 million.
The Company continues to work collaboratively with the TSX with
respect to their staff notices regarding its investments in U.S.
based medical cannabis related entities.
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. We are
committed to providing pharma-grade medical cannabis, superior
patient care while balancing patient economics and returns to
shareholders.
For more information, visit www.aphria.com.
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,
expectations related to the closing of the Transaction, the
Call/Put or the guarantees from the individual buyers .
Forward-looking statements 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 cannabis or adult use of cannabis; inability to
access sufficient capital from internal and external sources,
and/or inability to access sufficient capital on favourable terms;
the medical cannabis industry in Canada or the United
States 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.
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.
SOURCE Aphria Inc.