Investment Provides Tilray a Potential
Accelerated Path into U.S. Cannabis Market Upon Federal
Legalization
Amendment and Extension of Convertible Notes
Enables MedMen to Reshape Balance Sheet and Further Accelerate its
Growth Trajectory
Tilray and MedMen CEOs to Host a Conference
Call and Webcast at 5:00 PM Eastern Time
Tilray, Inc. (“Tilray”) (Nasdaq l TSX: TLRY), a leading
global cannabis-lifestyle and consumer packaged goods company, and
MedMen Enterprises Inc. (“MedMen”) (CSE: MMEN) (OTCQX:
MMNFF), a premier American cannabis retailer, today announced that
Tilray has acquired the majority of the outstanding senior secured
convertible notes (the “Notes”) of MedMen that were
originally held by certain funds affiliated with Gotham Green
Partners, LLC and other funds (collectively, “GGP”). The
acquisition provides Tilray with a path, subject to necessary
regulatory approvals, to obtain a significant equity position in
MedMen through conversion of the Notes and exercise of associated
warrants (the “Warrants”) following U.S. cannabis
legalization (or Tilray’s waiver of such condition).In connection
with the sale of the Notes, MedMen and GGP amended the restrictive
covenants and extended the debt maturity to 2028 to provide MedMen
the flexibility to execute on its growth priorities and explore
additional strategic opportunities. In addition, MedMen separately
announced today a significant equity investment from a private
placement of MedMen Shares (as defined below) and warrants to a
group of investors.
MedMen is a leading cannabis retail brand in the U.S., holding
21 licenses and 25 retail locations across key urban centers,
including the Bay Area, Los Angeles, Boston, Chicago, and Las
Vegas, and a significant position in California, the world’s
largest market. Prior to U.S. federal legalization of cannabis, and
subject to compliance with applicable laws and stock exchange
rules, MedMen will actively explore opportunities to expand
MedMen’s footprint across international markets.
Irwin D. Simon, Tilray’s Chairman and CEO, said, “Backed by
accelerating trends towards legalization globally, we are focused
on building the world's leading cannabis-focused consumer branded
company with a goal of $4 billion of revenue by the end of our
fiscal 2024. The investment we are announcing in MedMen securities
today, one of the most recognized brands in the $80 billion U.S.
cannabis market, is a critical step towards delivering on our
objective as we work to enable Tilray to lead the U.S. market when
legalization allows.”
Mr. Simon continued, “Our ability to maximize value from this
game-changing transaction rests on the support of our shareholders
at the upcoming Special Meeting to vote on our Authorized Shares
Proposal, which will increase the number of authorized shares
Tilray has available to not only complete this transaction, but
also to execute on other strategic acquisitions. I cannot stress
enough the importance of making our shareholders’ voices count to
enable us to maximize our potential to create substantial value for
our shareholders in the near-term and in the future.”
Tom Lynch, MedMen’s Chairman and CEO, added, “Our management
team has spent the past 18 months executing a disciplined
turnaround plan. We are grateful to our stakeholders for their
patience and support as we worked to fix the business and rebuild
trust and credibility. We believe that patience has paid off, as
these efforts have succeeded in attracting partners who share our
vision for building the world’s most powerful cannabis retail
brand. In addition, the proceeds from the private placement and
amendments to the Notes, gives MedMen the cash and flexibility to
match our revenue trajectory to our operational expertise and
internationally renowned brand. MedMen 2.0 is here, and we are
thrilled to embark on the next stage of our journey.”
Transaction Overview
Under the terms of the transaction, a newly formed limited
partnership (the “SPV”) established by Tilray and other
strategic investors acquired an aggregate principal amount of
approximately U.S. $165.8 million of the Notes and the Warrants,
all of which were originally issued by MedMen and held by GGP,
representing 75% of the outstanding Notes and 65% of the
outstanding Warrants. Tilray’s interest in the SPV represents
rights to 68% of the Notes and related Warrants held by the SPV,
which are convertible into, and exercisable for, approximately 21%
of the outstanding Class B subordinate voting shares of MedMen (the
“MedMen Shares”) upon closing of the transaction. Tilray’s
ability to convert the Notes and exercise the Warrants is dependent
upon U.S. federal legalization of cannabis or Tilray’s waiver of
such requirement as well as any additional regulatory approvals. As
consideration for Tilray’s interest in the Notes and Warrants, and
subject to Tilray receiving the stockholder approval necessary to
increase the number of shares of its authorized capital stock,
Tilray will issue approximately 9.0 million shares of its common
stock to GGP; provided, however, that if Tilray has not received
the stockholder approval by December 1, 2021, GGP may elect to
receive cash rather than Tilray shares. Tilray’s previously
scheduled Special Meeting of Stockholders will be held this
Thursday, August 19, 2021. MedMen did not receive any proceeds from
the transfer of the Notes.
In connection with the transactions, the parties agreed to amend
and restate (the “Amendment and Restatement”) the facility
governing the Notes (the “Facility”) to, among other things,
extend the maturity date to August 16, 2028, eliminate any cash
interest obligations and instead provide for pay-in-kind interest,
eliminate certain repricing provisions, and eliminate and revise
certain restrictive covenants. Accrued pay-in-kind interest on the
Notes will be convertible at price equal to the trailing 30-day
volume weighted average price of the MedMen Shares, as and when
such pay-in-kind interest becomes due and payable, subject to the
maximum permitted discount under the rules of the Canadian
Securities Exchange. The Notes held by holders on the date of the
amendment and restatement may not be prepaid by MedMen until
legalization of the general cultivation, distribution and
possession of marijuana at the federal level in the United States
or the removal of the regulation of such activities from the U.S.
federal laws. Any such prepayment shall require at least six
months’ notice. If Notes are transferred following the date of the
amendment and restatement (the “effective date”), such Notes
may not be prepaid until the earlier of the third anniversary of
the effective date or 90 days following the transfer of such Notes
to such holders. Transfers of Notes will be permitted subject only
to notice and compliance with securities laws. The Notes will also
provide the holders of the Notes with a top-up right to acquire
additional MedMen Shares and a pre-emptive right with respect to
future financings of the Company, subject to certain exceptions,
upon the issuance by MedMen of certain equity or equity-linked
securities. No changes have been made to the conversion and
exercise prices of the Notes or related Warrants.
This news release shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of the
securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful. The securities being offered have not been
registered under the United States Securities Act of 1933, as
amended (the “U.S. Securities Act”), and may not be offered or sold
in the United States absent registration or an applicable exemption
from the registration requirements of the U.S. Securities Act, and
applicable state securities laws. The MedMen has agreed to provide
customary registration rights to holders of the Notes with respect
to the MedMen Shares underlying the Notes and related Warrants and
the investors in the private placement.
For further transaction details, investors and security holders
may obtain a copy of the presentation associated with the
transaction on the MedMen website at https://investors.medmen.com
and on the investor page of Tilray’s website at
https://ir.tilray.com.
Conference Call
Tilray and MedMen will host a conference call to discuss today’s
announcement at 5:00 p.m. ET. Investors interested in participating
in the live call can dial (877) 458-4121 from Canada and the U.S.
or (323) 794-2597 from international locations.
There will also be a simultaneous, live webcast available on the
Investors section of the Company’s website at www.tilray.com. The
webcast will also be archived after the call concludes.
Advisors
Moelis & Company LLC is serving as exclusive financial
advisor to MedMen. Weil, Gotshal & Manges LLP, Cassels Brock
& Blackwell LLP and Manatt, Phelps & Phillips, LLP are
serving as legal counsel to MedMen. DLA Piper LLP (U.S.) and DLA
Piper (Canada) LLP acted as legal counsel to Tilray. Davies Ward
Phillips & Vineberg LLP acted for Serruya Private Equity.
Canaccord Genuity Corp. is serving as exclusive financial advisor
to Gotham Green. KTBS Law, LLP, Honigman, LLP, Stubbs Alderton
& Markiles, LLP and SkyLaw Professional Corporation acted as
legal counsel to Gotham Green.
About Tilray, Inc.
Tilray, Inc. is a leading global cannabis-lifestyle and consumer
packaged goods company with operations in Canada, the United
States, Europe, Australia, and Latin America that is changing
people's lives for the better – one person at a time – by inspiring
and empowering the worldwide community to live their very best life
by providing them with products that meet the needs of their mind,
body, and soul and invoke a sense of wellbeing. Tilray’s mission is
to be the trusted partner for its patients and consumers by
providing them with a cultivated experience and health and
wellbeing through high-quality, differentiated brands and
innovative products. A pioneer in cannabis research, cultivation,
and distribution, Tilray’s unprecedented production platform
supports over 20 brands in over 20 countries, including
comprehensive cannabis offerings, hemp-based foods, and alcoholic
beverages.
For more information on how we open a world of wellbeing, visit
www.Tilray.com.
About MedMen
MedMen is a premier American cannabis retailer with an
operational footprint in California, Nevada, Illinois, Arizona,
Massachusetts, and Florida. MedMen offers a robust selection of
high-quality products, including MedMen-owned brands MedMen Red and
LuxLyte through its premium retail stores, proprietary delivery
service, as well as curbside and in-store pick up. MedMen Buds, an
industry-first loyalty program, provides exclusive access to
promotions, product drops and content. MedMen believes that a world
where cannabis is legal and regulated is safer, healthier, and
happier. Learn more about MedMen at www.medmen.com.
Early Warning Reporting Matters
Pursuant to the Transaction, Tilray, located at 655 Madison
Ave., New York, New York 10065, acquired beneficial ownership or
control or direction over Notes in the principal amount of
U.S.$165.8 million and Warrants to acquire approximately 135.3
million MedMen Shares held by the SPV. If the Notes were converted
and the Warrants exercised immediately following the completion of
the Transaction, the SPV would control 940.5 million MedMen Shares
and Tilray would hold beneficial ownership of approximately 639.5
million MedMen Shares. In addition to Tilray’s interests in the
Notes and Warrants, as a holder of Notes, the SPV (in which Tilray
has a 68% beneficial ownership) has certain top-up rights from
MedMen, which will enable the SPV to subscribe for additional
MedMen Shares to maintain its proportionate ownership of MedMen,
subject to certain issuances excluded from the top-up rights, and
will enable Tilray to maintain its proportionate beneficial
interest in MedMen. The SPV's acquisition of the purchased Notes
and Warrants, and Tilray’s beneficial ownership of such securities,
requires the disclosure included in this press release under the
heading “Early-Warning Reporting Matters” and the filing of an
early warning report (the “Early Warning Report”) for
purposes of National Instrument 62-103 - The Early Warning System
and Related Take-Over Bid and Insider Reporting Issues. A copy of
the Early Warning Report will be filed under MedMen’s profile on
www.SEDAR.com.
Tilray’s interests in the Notes and Warrants were acquired by
Tilray for investment purposes and its strategic rationale
described in this press release. In accordance with applicable
securities laws and subject to applicable stock exchange
requirements, Tilray may from time to time and at any time,
directly or otherwise, increase or decrease its ownership, control
or direction of MedMen Shares and Tilray and the SPV each reserves
the right to acquire or dispose of any or all of the Notes,
Warrants, top-up related securities or any MedMen Shares received
on conversion or exercise thereof in accordance with applicable
securities laws. Tilray’s and the SPV’s determination may be driven
by market conditions, future strategic planning, the business and
prospects of the MedMen and any other factors that Tilray or the
SPV, as applicable, may consider relevant from time to time.
Related Party Transaction
The Amendment and Restatement, including the issuance of the
top-up right and the pre-emptive right, are considered to be
"related party transactions" under Multilateral Instrument 61-101 –
Protection of Minority Security Holders in Special Transactions
(“MI 61-101”) insofar as they involve GGP and Parallax
Master Fund LP. Both GGP and its controlled funds, and Parallax
Master Fund LP and its controlled funds, are related parties (as
defined in MI 61-101) to MedMen and lenders under the Facility.
Unless there is an exemption, MedMen would ordinarily be required
to obtain a formal valuation and "minority approval", being
approval of disinterested shareholders of MedMen, with respect to
the Amendment and Restatement. As reported in MedMen's Unaudited
Interim Condensed Consolidated Financial Statements for the Nine
Months Ended March 27, 2021 and March 28, 2020, MedMen's
accumulated deficit and a negative net working capital (current
liabilities greater than current assets) as of March 26, 2021, as
well as a net loss and negative cash flow from operating activities
for the reporting period then ended raise substantial doubt about
MedMen's ability to continue as a going concern. MedMen is relying
on the exemption from obtaining a formal valuation available in
section 5.5(b) of MI 61-101 and the exemption from obtaining
minority approval available in section 5.7(e) of MI 61-101. MedMen
meets the requirements set out section 5.5(b) of MI 61-101 because
the Shares are only traded on the facilities of the Canadian
Securities Exchange. MedMen meets the requirements set out in
section 5.7(e) of MI 61-101 based on the board of directors of
MedMen, acting in good faith, having determined, and MedMen's
independent directors (being all the directors), acting in good
faith, unanimously having determined that MedMen is in serious
financial difficulty, that the Amendment and Restatement are
designed to improve MedMen's financial position, and that the
Amendments are reasonable in MedMen's circumstances. The material
change report for the Amendment and Restatement will not be filed
more than 21 days prior to closing, as the transactions that
constitute the related party transaction were effectively closed
upon of execution of the Amendment and Restatement, and until
execution, there was no material change that could be
disclosed.
Cautionary Statement Concerning Forward-Looking
Statements
Certain statements contained in this press release constitute
"forward-looking statements" within the meaning of federal
securities laws, including the Private Securities Litigation Reform
Act of 1995. Forward-looking statements are predictions based on
expectations and projections about future events and are not
statements of historical fact. You can identify forward-looking
statements by the use of forward-looking terminology such as
"plan," "continue," "expect," "anticipate," "intend," "predict,"
“believe,” "project," "estimate," "likely," "believe," "might,"
"seek," "may," "will," "remain," "potential," "can," "should,"
"could," "future", “is positioned” and similar expressions, or the
negative of those expressions, or similar words or phrases that are
predictions of or indicate future events or trends and that do not
relate solely to historical matters. You can also identify
forward-looking statements by discussions of the Tilray’s or
MedMen’s strategic initiatives, including productivity and
synergies initiatives, our future performance and results of
operations.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
levels of activity, performance or achievements of Tilray or
MedMen, or industry results, to be materially different from any
future results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements, and you
should not rely on them as predictions of future events.
Forward-looking statements depend on assumptions, data or methods
that may be incorrect or imprecise and may not be able to be
realized. We do not guarantee that the transactions and events
described will happen as described (or that they will happen at
all). Forward-looking statements include statements regarding
intentions, beliefs, projections, outlook, analyses, or current
expectations for the Tilray or MedMen business; the legalization of
cannabis under U.S. federal laws and Tilray’s ability to become the
world's leading cannabis-focused consumer branded company with $4
billion of revenue by 2024; and Tilray’s receipt of stockholder
approval to increase its authorized capital stock. Certain material
factors, estimates, goals, projections, or assumptions were used in
drawing the conclusions contained in the forward-looking statements
throughout this communication. Many factors could cause actual
results, performance or achievement to be materially different from
any forward-looking statements, and other risks and uncertainties
not presently known to Tilray or MedMen, as applicable, or that
Tilray or MedMen, as applicable, deems immaterial could also cause
actual results or events to differ materially from those expressed
in the forward-looking statements contained herein. For a more
detailed discussion of these risks and other factors, see the
Annual Report on Form 10-K of Tilray for the fiscal year ended May
31, 2021. The forward-looking statements included in this
communication are made as of the date of this communication and
MedMen does not undertake any obligation to publicly update such
forward-looking statements to reflect new information, subsequent
events or otherwise unless required by applicable securities
laws.
A variety of factors, including known and unknown risks, many of
which are beyond the control of Tilray or MedMen, could cause
actual results to differ materially from the forward-looking
statements in this press release and other reports filed with, or
furnished to, the SEC and other regulatory agencies by Tilray or
MedMen and made by the directors, officers, other employees, and
other persons authorized to speak on behalf of Tilray or MedMen.
Such factors include, without limitation: (i) if, when and to the
extent cannabis is legalized at the federal level in the United
States; (ii) the ability of either company to effectively grow and
expand retail operations in the United States; (iii) ability to
effectively deal with the restrictions, limitations and health
issues presented by the COVID-19 pandemic; (iv) the respective
management teams’ perceptions of historical trends, current
conditions and expected future developments; (v) the ability to
effectively manage growth, including anticipated and unanticipated
costs; (vi) achieving the anticipated results of the Tilray or
MedMen's strategic plans, including growing market share; (vii) the
adequacy of each company’s capital resources and liquidity,
including but not limited to, availability of sufficient cash flow
to successfully execute their respective growth strategies (either
within the expected timeframe or at all); (viii) the ability to
raise necessary or desired funds to achieve their respective
strategic business plans; (ix) obtaining and maintaining all
required licenses, approvals and permits; (x) favorable production
levels and sustainable costs; (xi) inputs, suppliers and skilled
labor being unavailable or available only at uneconomic costs;
(xii); (xiii) adverse future legislative and regulatory
developments involving medical and recreational marijuana; (xiv)
consumer interest in the companies’ respective products and
products of other brands that MedMen may offer in its stores; (xv)
competition; (xvi) government regulation of either company’s
activities and products including, but not limited, to the areas of
taxation and environmental protection; (xviii) the risks of
operating or investing in the marijuana industry in the United
States; (xviii) the outcome of any claims, litigation and
proceedings of which either company is a party, including any
settlements of litigation or pending regulatory or government
investigations or actions or other legal contingencies; (xix)
either company’s ability to conduct operations in a safe, efficient
and effective manner; (xx) changes in general economic, business
and political conditions in which the companies operate, including
changes in the financial markets; changes in applicable laws
generally and (xxi) and those other risk factors discussed in
MedMen’s Form 10 (as amended) or in the risk factors discussed in
Tilray’s Annual Report on Form 10-K, and other continuous
disclosure filings, all available under either at www.sec.gov (with
respect to both MedMen and Tilray) or www.sedar.com (solely with
respect to MedMen).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210817005876/en/
Tilray Media Berrin Noorata, news@tilray.com
Tilray Investor Relations Raphael Gross,
Raphael.Gross@icrinc.com, +1-203-682-8253
MedMen Media Lisa Weser, MedMen@Trailblaze.co
MedMen Investor Relations Morry Brown,
morry.brown@MedMen.com
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