TORONTO, and SMITH FALLS, ON,
April 8, 2021 /PRNewswire/ - Canopy
Growth Corporation ("Canopy") (TSX: WEED) (NASDAQ: CGC) and The
Supreme Cannabis Company, Inc. ("Supreme Cannabis" or "Supreme")
(TSX: FIRE) (OTCQX: SPRWF) (FRA: 53S1) are pleased to announce that
they have entered into a definitive arrangement agreement (the
"Arrangement Agreement") under which Canopy will acquire all of
Supreme Cannabis' issued and outstanding common shares (the
"Supreme Cannabis Shares") in a transaction valued at approximately
$435 million on a fully-diluted basis (the "Transaction").
Under the terms of the Arrangement Agreement, Supreme Cannabis
shareholders will receive 0.01165872 of a Canopy common share (the
"Exchange Ratio") and $0.0001 in cash
in exchange for each Supreme Cannabis Share held. The Transaction
provides Supreme Cannabis shareholders with a premium per Supreme
Cannabis Share of approximately 66% based on the closing prices of
the Supreme Cannabis Shares and Canopy common shares on the Toronto
Stock Exchange (the "TSX") as of April 7,
2021.
The Transaction is expected to provide several benefits to both
Canopy and Supreme Cannabis shareholders. Notably, following
completion of the acquisition, Canopy will possess a strengthened
brand portfolio including one of Canada's leading premium brands, 7ACRES. Brand
growth is anticipated with distribution supported by Canopy's
robust sales and distribution network as well as superior consumer
insights and R&D capabilities. In addition to receiving a
market premium, Supreme Cannabis shareholders will also benefit
from Canopy's US CBD business and conditional positioning for
continued exposure to the US market expansion. Further value will
be derived through the scalable Kincardine, Ontario production facility, which
has a demonstrated record of producing premium flower at low
cost.
Key Transaction Highlights
- Solidifies Canopy's leadership position in the Canadian
recreational market, well-positioned for growth: The
Transaction combines Canopy's preeminent position with Supreme
Cannabis' Top-10 position in Canada to create a pro forma Canadian
recreational market share of 13.6%(1), including 7ACRES
holding Canada's number one
premium flower brand position, number one in PAX vapes, and Top-5
in pre-rolled joints(2).
-
- Combined pro forma market share estimated to be 23.3% of the
premium flower segment in Ontario
and 21.4% in British
Columbia(3).
- Adds premium brands to Canopy's portfolio: The addition
of Supreme Cannabis' premium brands, 7ACRES and 7ACRES Craft
Collective, complement Canopy's current consumer offering and will
strengthen Canopy's brand portfolio, with both brands expected to
continue to grow with further investment and expansion. Supreme
Cannabis' Blissco and Truverra brands also add breadth to Canopy's
market presence in both the recreational and medical markets.
- Brings a premium, low-cost and scalable cultivation facility
to Canopy's production capabilities: Supreme Cannabis'
hybrid-greenhouse cultivation facility at Kincardine, Ontario has a demonstrated
capability of consistently producing premium flower from
sought-after strains at low cost with significant potential for
scaling.
- Secures an immediate attractive premium for Supreme Cannabis
shareholders: The Transaction provides Supreme Cannabis
shareholders with a premium per Supreme Cannabis Share of
approximately 66% based on the closing prices of the Supreme
Cannabis Shares and Canopy common shares on the TSX as of
April 7, 2021.
- Participation by Supreme Cannabis shareholders in the future
of Canopy: The Supreme Cannabis shareholders will receive
Canopy common shares pursuant to the Transaction and will have
access to Canopy's consumer insights, advanced R&D and
innovation capabilities as well as the opportunity to participate
in the future growth of the US market based on the Company's
conditional positioning for rapid market entry. Post-Transaction,
Canopy's industry-leading balance sheet and cash position of
approximately $2.5 billion positions
the company for further expansion and product development.
- Opportunity to achieve potential cost synergies estimated
at approximately $30mm within two-years: Canopy
anticipates post-Transaction cost synergy opportunities across both
cost of goods sold and sales, general and administrative expenses,
as it optimizes and integrates Supreme's operations and shared
services.
"As we continue to expand our leading brand portfolio, we're
excited to reach more consumers through Supreme's premium brands
and high-quality products, further solidifying Canopy's market
leadership," said David Klein, Chief
Executive Officer of Canopy. "Supreme's deep commitment to superior
genetics, top-tier cultivation and strict quality control,
paired with Canopy's leading consumer insights, advanced R&D
and innovation capabilities, is expected to create a powerful
combination that aligns with our strategic focus to generate growth
with premium quality products across key categories."
"This transaction is a testament to the value created by all the
teams at Supreme and will be beneficial to all of our
stakeholders," added Beena
Goldenberg, President and CEO of Supreme Cannabis. "We have
been successful at delivering great products that achieved strong
customer loyalty, and operating at levels of efficiency that are
industry-leading. We have also built a highly sought-after premium
brand in 7ACRES. Combining Supreme Cannabis with Canopy – a
Canadian market leader with exposure to the United States – presents a significant
value creation opportunity for both companies. We look forward to
working with Canopy to complete this transaction."
Transaction Details
The Transaction will be effected
by way of a court-approved plan of arrangement under the Canada
Business Corporations Act, requiring the approval of at least
two-thirds of the votes cast by the shareholders of Supreme
Cannabis voting at a special meeting of shareholders to consider
the Transaction expected to be held in June
2021. Canopy has entered into voting support agreements with
certain of Supreme Cannabis' directors and officers pursuant to
which they have agreed, among other things, to vote their Supreme
Cannabis Shares in favour of the Transaction.
In addition to shareholder and court approvals, the Transaction
is subject to applicable regulatory approvals including, but not
limited to, TSX approval and approval under the Competition
Act (Canada) and the
satisfaction of certain other closing conditions customary in
transactions of this nature. The Arrangement Agreement includes
customary provisions, including non-solicitation, "fiduciary out"
and "right to match" provisions as well as a termination fee
of $12.5 million payable by Supreme Cannabis to Canopy in
certain specified circumstances.
Assuming timely receipt of all necessary court, shareholder,
regulatory and other third-party approvals and the satisfaction of
all other conditions, closing of the Transaction is expected to
occur by end of June 2021.
A full description of the Transaction will be set forth in the
management information circular of Supreme Cannabis (the
"Circular"), which will be mailed to Supreme Cannabis shareholders
and filed with the Canadian securities regulators on the System for
Electronic Document Analysis and Retrieval ("SEDAR") at
www.sedar.com.
Approvals and Recommendation
The Transaction was
approved by the board of directors of each of Canopy and Supreme
Cannabis, and Supreme Cannabis' board of directors recommends that
Supreme Cannabis shareholders vote in favour of the
Transaction.
Each of BMO Capital Markets and Hyperion Capital provided the
Supreme Cannabis Board of Directors with an opinion, dated
April 7, 2021, to the effect that, as
of the date of such opinion, the consideration payable pursuant to
the Transaction is fair, from a financial point of view, to the
Supreme Cannabis shareholders, in each case, based upon and subject
to the respective assumptions, limitations, qualifications and
other matters set forth in such opinions.
None of the securities to be issued pursuant to the Transaction
have been or will be registered under the United States Securities
Act of 1933, as amended (the "U.S. Securities Act"), or any state
securities laws, and any securities issuable in the Transaction are
anticipated to be issued in reliance upon available exemptions from
such registration requirements pursuant to Section 3(a)(10) of the
U.S. Securities Act and applicable exemptions under state
securities laws. This press release does not constitute an offer to
sell or the solicitation of an offer to buy any securities.
Advisors and Counsel
Cassels
Brock & Blackwell LLP is acting as strategic and
legal advisor to Canopy.
BMO Capital Markets is acting as exclusive financial advisor to
Supreme Cannabis and provided a fairness opinion to the Supreme
Cannabis board of directors. Hyperion Capital Inc. provided an
independent fairness opinion to the board of directors of Supreme
Cannabis. Borden Ladner Gervais LLP is acting as legal counsel
to Supreme Cannabis.
(1)
|
Source:
Provincial Boards; Headset Note: This market share data differs
from Canopy's internal market share data provided during Canopy's
previous earnings calls due to different methodologies and time
periods. Market share data represents 01-Oct-20 through latest
available data: Provincial Board data for ON online, PEI, NS
(27/28-Mar-21) and NB (17-Mar-21); and Headset data for ON retail
(28-Feb-21) and AB, BC and SK (31-Mar-21).
|
(2)
|
Market share
data represents 01-Oct-20 through latest available data: Provincial
Board data for ON online, PEI, NS (27/28-Mar-21) and NB
(17-Mar-21); and Headset data for ON retail (28-Feb-21) and AB, BC
and SK (31-Mar-21).
|
(3)
|
Internal Canopy
Growth management estimate.
|
About Canopy Growth
Canopy Growth (TSX:WEED,
NASDAQ:CGC) is a world-leading diversified cannabis and
cannabinoid-based consumer product company, driven by a passion to
improve lives, end prohibition, and strengthen communities by
unleashing the full potential of cannabis. Leveraging consumer
insights and innovation, we offer product varieties in high-quality
dried flower, oil, softgel capsule, infused beverage, edible, and
topical formats, as well as vaporizer devices by Canopy Growth and
industry-leader Storz & Bickel. Our global medical brand,
Spectrum Therapeutics, sells a range of full-spectrum products
using its colour-coded classification system and is a market leader
in both Canada and Germany. Through our award-winning Tweed and
Tokyo Smoke banners, we reach our adult-use consumers and have
built a loyal following by focusing on top quality products and
meaningful customer relationships. Canopy Growth has entered into
the health and wellness consumer space in key markets including
Canada, the United States, and Europe through BioSteel sports nutrition, and
This Works skin and sleep solutions; and has introduced additional
federally-permissible CBD products to the
United States through our First & Free and Martha
Stewart CBD brands. Canopy Growth has an established partnership
with Fortune 500 alcohol leader Constellation Brands. For more
information visit www.canopygrowth.com.
About Supreme Cannabis
The Supreme Cannabis Company,
Inc., (TSX: FIRE) (OTCQX: SPRWF) (FRA: 53S1), is a global
diversified portfolio of distinct cannabis companies, products and
brands. Since 2014, the Company has emerged as one of the world's
most premium producers of recreational, wholesale and medical
cannabis products.
Supreme Cannabis' portfolio of brands caters to diverse consumer
and patient experiences, with brands and products that address
recreational, wellness, medical and new consumer preferences. The
Company's recreational brand portfolio includes, 7ACRES, 7ACRES
Craft Collective, Blissco, sugarleaf, and Hiway. Supreme Cannabis
addresses national and international medical cannabis opportunities
through its premium Truverra brand.
Supreme Cannabis' brands are backed by a focused suite of
world-class operating assets that serve key functions in the value
chain, including, scaled cultivation, value-add processing,
automated packaging and product testing and R&D. Follow the
Company on Instagram, Twitter, Facebook, LinkedIn and YouTube.
We simply grow better.
Notice Regarding Forward-Looking Information
This news release contains "forward-looking statements" within
the meaning of the United States Private Securities Litigation
Reform Act of 1995 and "forward-looking information" within the
meaning of applicable Canadian securities legislation. Often, but
not always, forward-looking statements and information can be
identified by the use of words such as "plans", "expects" or "does
not expect", "is expected", "estimates", "intends", "anticipates"
or "does not anticipate", or "believes", or variations of such
words and phrases or state that certain actions, events or results
"may", "could", "would", "might" or "will" be taken, occur or be
achieved. Forward-looking statements or information involve known
and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Canopy,
Supreme Cannabis or their respective subsidiaries to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements or
information contained in this news release. Examples of such
statements include statements with respect to the timing and
outcome of the Arrangement, the anticipated benefits of the
Transaction, the estimated potential synergies as a result of the
Transaction, the anticipated timing of the Supreme Cannabis special
meeting of shareholders and the closing of the Transaction, the
satisfaction or waiver of the closing conditions set out in the
Arrangement Agreement, including receipt of all regulatory
approvals. Risks, uncertainties and other factors involved with
forward-looking information could cause actual events, results,
performance, prospects and opportunities to differ materially from
those expressed or implied by such forward-looking information,
including assumptions as to the time required to prepare and mail
meeting materials to Supreme Cannabis shareholders; the ability of
the parties to receive, in a timely manner and on satisfactory
terms, the necessary regulatory, court and shareholder approvals;
the ability of the parties to satisfy, in a timely manner, the
other conditions to the completion of the Transaction; the prompt
and effective integration of Canopy's and Supreme's businesses and
the ability to achieve the anticipated synergies contemplated by
the Transaction; inherent uncertainty associated with financial or
other projections; risks related to the value of the Canopy common
shares to be issued pursuant to the Transaction; the diversion of
management time on Transaction-related issues; expectations
regarding future investment, growth and expansion of Canopy's and
Supreme's operations; regulatory and licensing risks; changes in
general economic, business and political conditions, including
changes in the financial and stock markets; risks related to
infectious diseases, including the impacts of the Covid-19
pandemic; legal and regulatory risks inherent in the cannabis
industry, including the global regulatory landscape and enforcement
related to cannabis, political risks and risks relating to
regulatory change; risks relating to anti-money laundering laws;
compliance with extensive government regulation and the
interpretation of various laws regulations and policies; public
opinion and perception of the cannabis industry; and such other
risks contained in the public filings of Canopy filed with Canadian
securities regulators and available under Canopy's profile on SEDAR
at www.sedar.com and with the United States
Securities and Exchange Commission through EDGAR at
www.sec.gov/edgar, including Canopy's annual report on
Form 10-K for the year ended March 31,
2020, as amended, and in the public filings of Supreme
Cannabis filed with Canadian securities regulators and available
under Supreme Cannabis' profile on SEDAR at
www.sedar.com, including Supreme Cannabis' annual
information form for the year ended June 30,
2020.
In respect of the forward-looking statements and information
concerning the anticipated benefits and completion of the
Transaction and the anticipated timing for completion of the
Transaction, Canopy and Supreme Cannabis have provided such
statements and information in reliance on certain assumptions that
they believe are reasonable at this time. Although Canopy and
Supreme Cannabis believe that the assumptions and factors used in
preparing the forward-looking information or forward-looking
statements in this news release are reasonable, undue reliance
should not be placed on such information and no assurance can be
given that such events will occur in the disclosed time frames or
at all. Should one or more of the foregoing risks or uncertainties
materialize, or should assumptions underlying the forward-looking
information prove incorrect, actual results may vary materially
from those described herein as intended, planned, anticipated,
believed, estimated or expected. Although Canopy and Supreme
Cannabis have attempted to identify important risks, uncertainties
and factors which could cause actual results to differ materially,
there may be others that cause results not to be as anticipated,
estimated or intended. The forward-looking information and
forward-looking statements included in this news release are made
as of the date of this news release and Canopy and Supreme Cannabis
do not undertake any obligation to publicly update such
forward-looking information or forward-looking information to
reflect new information, subsequent events or otherwise unless
required by applicable securities laws.
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SOURCE Canopy Growth Corporation