Cronos Group Inc. (NASDAQ: CRON) (TSX: CRON) (“Cronos Group”) and
PharmaCann Inc. (“PharmaCann”), one of the largest vertically
integrated cannabis companies in the United States (“U.S.”), today
announced that they have entered into an agreement under which a
wholly owned subsidiary of Cronos Group has purchased an option
(the “Option”) to acquire an approximately 10.5% ownership stake in
PharmaCann (the "Transaction”) on a fully-diluted basis. The Option
exercise will be based upon various factors, including the status
of U.S. federal cannabis legalization, as well as regulatory
approvals, including in the states where PharmaCann operates that
may be required upon exercise.
PharmaCann has a broad geographic footprint in
the U.S. and has built an efficient, effective and scalable
operating model, including six production facilities and 23
dispensaries operating under the Verilife™ brand across six limited
license states: New York, Illinois, Ohio, Maryland, Pennsylvania
and Massachusetts. PharmaCann continues to invest in its
manufacturing infrastructure and brand development to capitalize on
the significant consumer retail and business-to-business wholesale
opportunities.
“Our U.S. growth strategy focuses on delivering
long term shareholder value by assembling a best-in-class brand and
intellectual property portfolio and positioning to deploy our
products in the U.S. market through investments and opportunities
with U.S. leaders who share our vision and commitment to
responsibly distributing disruptive cannabinoid products that
improve people’s lives,” said Kurt Schmidt, President and Chief
Executive Officer of Cronos Group. “We were attracted to PharmaCann
as an investment because of their disciplined capital allocation,
strong track-record and compelling licensed manufacturing and
retail footprint. Further, we are excited to partner with
PharmaCann because of our shared commitment to elevating product
quality and consistency through science and best in class
operations and manufacturing.”
“We are pleased to announce our strategic
alliance with Cronos Group,” said Brett Novey, Chief Executive
Officer of PharmaCann. “This investment validates our position as a
leading vertically integrated U.S. cannabis company and highlights
our ability to continue to expand and enhance our strong asset
base. We are excited to work with Cronos Group as we advance
PharmaCann’s mission to improve people’s lives through
cannabis.”
Transaction Terms
Under the terms of the Transaction, total
consideration paid by Cronos Group for the Option was approximately
$110.4 million, which was deposited by Cronos Group with a
third-party paying agent to be distributed directly to PharmaCann
shareholders. The Option is subject to certain anti-dilution and
other adjustments.
At Cronos Group’s election and following its
exercise of the Option, Cronos Group and PharmaCann will enter into
commercial agreements that would permit each party to offer its
products through either party’s distribution channels. In addition,
at Cronos Group’s election and following its exercise of the
Option, Cronos Group and PharmaCann will enter into an investor
rights agreement that would provide Cronos Group with certain
governance rights, such as a board seat or board observer subject
to certain conditions, and a registration rights agreement that
would provide Cronos Group with customary registration rights of
PharmaCann common stock.
Michael Gorenstein, Executive Chairman of Cronos
Group, and Jason Adler, a director of Cronos Group, each hold an
indirect interest in PharmaCann by way of their interest in a fund
affiliated with Gotham Green Partners, which is a stockholder of
PharmaCann. A special committee composed entirely of independent
directors of Cronos Group was formed to evaluate and make
recommendations to the Board of Directors of Cronos Group with
respect to the Transaction and other opportunities in the
U.S.
The Transaction has been approved by the
PharmaCann Board of Directors and the requisite PharmaCann
shareholders and approved by the Cronos Group Board of Directors
(other than Mr. Gorenstein and Mr. Adler) following the unanimous
recommendation of the special committee of independent
directors.
Cowen served as financial advisor to the special
committee of independent directors of Cronos Group and Sullivan
& Cromwell LLP and McGuireWoods LLP served as legal advisors to
Cronos Group. Perella Weinberg Partners LP served as financial
advisor to Altria Group, Inc.
Canaccord Genuity Corp. served as financial
advisor and Fox Rothschild LLP served as legal advisor to
PharmaCann.
About Cronos GroupCronos Group
is an innovative global cannabinoid company with international
production and distribution across five continents. Cronos Group is
committed to building disruptive intellectual property by advancing
cannabis research, technology and product development. With a
passion to responsibly elevate the consumer experience, Cronos
Group is building an iconic brand portfolio. Cronos Group’s
portfolio includes PEACE NATURALS™, a global wellness platform, two
adult-use brands, COVE™ and Spinach™, and three U.S. hemp-derived
CBD brands, Lord Jones™, Happy Dance™ and PEACE+™. For more
information about Cronos Group and its brands, please visit:
thecronosgroup.com.
About PharmaCannPharmaCann is
one of the nation’s largest privately held and vertically
integrated cannabis companies, providing safe, reliable, and
high-quality cannabis products to people in both the medical and
adult-use markets. The PharmaCann geographic footprint includes
PharmaCann dispensaries and cultivation and processing operations
in six states. For more information about PharmaCann, please visit:
PharmaCann.com.
Forward-looking StatementsThis
press release may contain information that may constitute
“forward-looking information” or “forward-looking statements”
within the meaning of applicable Canadian and U.S. securities laws
(collectively, “Forward-looking Statements”). All information
contained herein that is not clearly historical in nature or that
necessarily depends on future or subsequent events may constitute
Forward-looking Statements. In some cases, Forward-looking
Statements can be identified by the use of forward-looking
terminology such as “may”, “will”, “expect”, “plan”, “anticipate”,
“intend”, “potential”, “estimate”, “believe” or the negative of
these terms, or other similar words, expressions or phrases
intended to identify Forward-looking Statements. Some of the
Forward-looking Statements contained in this press release include
Cronos Group’s intention to build an international iconic brand
portfolio and develop disruptive intellectual property.
Forward-looking Statements are necessarily based upon a number of
estimates and assumptions that, while considered reasonable by
management, are inherently subject to significant business,
economic and competitive risks, financial results, results,
performance or achievements expressed or implied by those
Forward-looking Statements. Actual results may differ materially
from current expectations because of risks associated with, among
other things: (i) uncertainties as to Cronos Group’s consideration
and/or ability to exercise the Option, including the status and
future development of federal legalization of cannabis in the U.S.;
(ii) uncertainties as to Cronos Group’s anticipated benefits of the
Transaction and assumptions as to the timing of exercise of the
Option; (iii) possibilities that the various conditions to Cronos
Group’s exercise of the Option may not be satisfied, including,
without limitation, the state regulatory approvals that may be
required prior to the exercise of the Option and the possibility
that a governmental entity may prohibit, delay or refuse to grant
any state regulatory approval in connection with the exercise of
the Option; (iv) changes in U.S. federal laws regarding the
cultivation, distribution or possession of marijuana, including,
without limitation, the Controlled Substances Act of the U.S.; (v)
assuming all conditions to exercise the Option are satisfied,
possibilities that the exercise of the Option may involve
unexpected costs; (vi) possibilities that the industry in which
PharmaCann and its subsidiaries operates may be subject to future
risks, including regulatory and license risks; (vii) response of
employees, customers, suppliers, business partners, regulators,
markets and the public to the announcement of the Transaction and
if applicable, in connection with exercise of the Option; and
(viii) other expectations and assumptions concerning the
transactions contemplated between Cronos Group and PharmaCann.
While the list of factors presented here is representative, no list
should be considered a statement of all potential risks,
uncertainties or assumptions that could have a material adverse
effect on Cronos Group’s consolidated financial condition or
results of operations. Investors are cautioned that Forward-looking
Statements are subject to various risks and uncertainties, many of
which are difficult to predict and generally beyond the control of
Cronos Group, that could cause actual results and developments to
differ materially from those expressed in, or implied or projected
by, the Forward-looking Statements. Forward-looking Statements are
not guarantees of future performance and involve known and unknown
risks, uncertainties and other factors, including those discussed
in Cronos Group’s Annual Report on Form 10-K for the year ended
December 31, 2020, and Cronos Group’s Quarterly Report on Form 10-Q
for the period ended March 31, 2021, both of which have been filed
on SEDAR and EDGAR and can be accessed at www.sedar.com and
www.sec.gov/edgar, respectively. Any Forward-looking Statement
included in this press release is made as of the date of this press
release and, except as required by law, Cronos Group disclaims any
obligation to update or revise any Forward-looking Statement.
Readers are cautioned not to put undue reliance on any
Forward-looking Statement.
For further information, please contact:
Cronos GroupShayne LaidlawInvestor
RelationsTel: (416)
504-0004investor.relations@thecronosgroup.com
PharmaCannBeth CoronelliInvestor RelationsTel:
312-667-6260 ext. 322019communications@pharmacann.com
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