The Flowr Corporation (TSX.V: FLWR; OTC: FLWPF)
(“
Flowr” or the “
Company”)
announced today that it has entered into a definitive agreement
(the “
Agreement”) to acquire (the
“
Acquisition”) the remaining 80.2% interest in
Holigen Holdings Limited (“
Holigen”) by way of a
share purchase. Flowr previously announced its intention to acquire
19.8% of Holigen. Upon the Closing of the Acquisition, Flowr
expects to own 100% of the issued and outstanding shares of
Holigen. The Acquisition has been approved by the board of
directors of each of Flowr and Holigen and is strongly supported by
both management teams.
"The full acquisition of Holigen is a natural
evolution of our global cannabis strategy. The combination of
Flowr’s leading cultivation know-how and facility design with
Holigen’s global footprint, expertise in GMP, and deep
pharmaceutical experience is an excellent fit. The
opportunities in the European and Australian-Asian medical cannabis
markets are enormous and Holigen brings unmatched scale to service
these regions,” said Vinay Tolia, Flowr’s Chief Executive
Officer. “Over the course of this year, we have worked
closely with Holigen’s management to help develop their incredible
assets, notably Aljustrel, their Portuguese outdoor cultivation
facility. Aljustrel, which is expected to be operational in
the second half of 2019, is a planned 7 million square foot outdoor
cultivation footprint with an expected ability to produce over
500,000 kilos annually and was deemed a Project of National
Interest by the Portuguese Government. This acquisition
positions us to be successful with two distinct and economically
sustainable strategies, the premium dried flower market in Canada
and the low-cost, large-scale extract medical market globally.”
The purchase price for the Acquisition is
expected to be satisfied by the issuance to DFT Trading Limited and
Pleiades Trading Limited, the vendors under the Agreement (the
“Vendors”) of 32,632,545 Series 1 Voting
Convertible Redeemable Preferred shares of the Company (the
“Consideration Shares”), cash consideration in an
amount equal to the Canadian dollar equivalent of €4,269,927.31
based on the Bank of Canada exchange rate on the business day prior
to the closing date of the Acquisition (the
“Closing”) and an amount equal to the Canadian
dollar equivalent of certain amounts loaned by related parties to a
Vendor to Holigen, up to a maximum amount of C$2,000,000
(collectively, the “Purchase Price”). In addition,
Flowr has agreed to pay the aggregate amount of €1,378,106.53 to
certain of Holigen’s creditors, subject to Closing. The Purchase
Price is subject to adjustment based on the working capital of
Holigen at Closing.
Pursuant to their terms (i) 10% of the
Consideration Shares will automatically convert into common shares
of Flowr (“Common Shares”) immediately after
issuance on Closing; and (ii) 40% of the Consideration Shares will
automatically convert into Common Shares six (6) months from the
Closing, in each case on a 1:1 basis. The remaining 50% of the
Consideration Shares will convert into Common Shares when and if
Holigen achieves certain milestones related to the lodging of
product applications and achieving certain planting targets in
Australia and Portugal. Flowr has agreed to expend an aggregate of
€17 million and AUD$11 million between closing and January 2020 in
order to help Holigen achieve such planting targets. Except as
provided by law, the holders of Consideration Shares are entitled
to vote with the holders of outstanding Common Shares and in any
such vote, each Consideration Share shall be entitled to a number
of votes equal to the number of Common Shares into which such
Consideration Share is convertible.
Pursuant to the Agreement, Flowr has agreed to
appoint Pauric Duffy (the control person of DFT Trading Limited) to
the board of directors of Flowr on Closing, subject to TSX.V
approval, and Mr. Duffy and Peter Comerford (the control person of
Pleiades Trading Limited) will be employed by the Company as
Managing Director, Europe and Managing Director, Australia
respectively. The Agreement contains customary representations,
warranties and covenants of each of Flowr, the Vendors and certain
guarantors of the Vendors, being DFT Holdings Limited (the parent
of DFT Trading Limited), Pauric Duffy, Pleiades Holdings Limited
(the parent of Pleiades Trading Limited) and Peter Comerford (the
“Guarantors”).
In connection with the Acquisition, Mr. Duffy
will indirectly receive, among other consideration, 26,160,060
Consideration Shares. As a result, Mr. Duffy will enter into a
governance agreement with Flowr, whereby he will agree to certain
customary standstill and transfer restrictions. The governance
agreement also provides that until the earlier of the first
business day on which Mr. Duffy beneficially owns shares of Flowr
representing less than 13% of the then issued and outstanding
Common Shares on a partially diluted basis, and (ii) the conversion
or redemption of all of the Consideration Shares held by Mr. Duffy
and his affiliates, the completion of certain transactions (as set
out in the governance agreement) by the Company will require
consent of Mr. Duffy (not to be unreasonably withheld). This
consent right, however, will not restrict the board of directors of
Flowr from exercising its fiduciary duties.
Holigen is to pay to its financial advisor a
transaction fee of C$750,000 (the “Transaction
Fee”), contingent upon the closing of a transaction such
as the Acquisition. Pursuant to the SPA, the Company has agreed to
pay the Transaction Fee if Closing occurs.
Closing is subject to, among other things, the
TSX.V’s conditional approval of the listing of the Common Shares
upon conversion of the Consideration Shares and the receipt of
approval of Flowr’s shareholders (if required). If the Closing has
not occurred on or before July 15, 2019 (which date may be extended
by mutual agreement of the parties), and if such outside date has
not been extended by the parties, Flowr or the Vendors may
terminate the Agreement.
Each of Holigen and its subsidiaries, the
Vendors and the Guarantors are arm’s length parties to Flowr.
About The Flowr Corporation
Flowr, through its subsidiaries, holds a
cannabis production and sales license granted by Health Canada.
With a head office in Toronto and a production facility in Kelowna,
BC, Flowr builds and operates large-scale, GMP-designed cultivation
facilities utilizing its own growing systems. Flowr expects to
provide premium-quality cannabis to the adult-use recreational
market and the medicinal market.
On behalf of The Flowr Corporation: Vinay Tolia CEO and
Director
CONTACT INFORMATION
MEDIA: Sean Griffin Vice President, Communications & Public
Relations (877) 356-9726 ext. 1526 sean.griffin@flowr.ca
INVESTORS: Thierry Elmaleh Head of Capital Markets (877)
356-9726 ext. 1520 thierry@flowr.ca
Forward Looking Information
This press release includes forward-looking
information within the meaning of Canadian securities laws
regarding Flowr, Holigen and their respective businesses, which may
include, but are not limited to: Flowr’s ownership interest in
Holigen; the payment of consideration under the Agreement and
payments to Holigen’s creditors; other statements about the
Acquisition and matters ancillary thereto, including the completion
and timing of the Acquisition; conditions precedent to the
Acquisition being completed; the satisfaction of the lodging of
product applications and the achievement of planting milestones in
Portugal and Australia; the issuance of Consideration Shares and
Common Shares; the employment of Mr. Duffy and Mr. Comerford; the
appointment to the Board of Mr. Duffy; commitments made by Flowr to
expend certain resources; the business, production and products of
Flowr, the Acquisition being a pivotal turning point in Flowr's
strategy and being transformational for Flowr, Holigen providing
Flowr with a platform to take its business to the next level, and
Holigen building what is expected to be one of the largest cannabis
cultivation projects in the world.
Often, but not always, forward-looking
information can be identified by the use of words such as
“potential”, “plans”, “is expected”, “expects”, “scheduled”,
“intends”, “contemplates”, “anticipates”, “believes”, “proposes” or
variations (including negative and grammatical 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. Such statements are based on the current expectations of
Flowr’s management and are based on assumptions and subject to
risks and uncertainties. Although Flowr’s management believes that
the assumptions underlying these statements are reasonable, they
may prove to be incorrect. The forward-looking events and
circumstances discussed in this press release may not occur by
certain specified dates or at all and could differ materially as a
result of known and unknown risk factors and uncertainties
affecting Flowr, including risks relating to the failure to obtain
regulatory approvals (including approval of the TSX.V); the failure
to complete the transactions described herein, including as a
result of certain conditions not being satisfied; risks relating to
the use of Flowr’s or Holigen’s products; risks relating to the
markets in which Flowr and Holigen operate and/or distribute their
respective products; possible failure to realize the anticipated
benefits of the transaction described herein; the reliance on
information provided by Holigen about its business and plans, risks
associated with operating in the markets in which Flowr and Holigen
operate; the failure to receive licenses and/or construct Flowr’s
and/or Holigen’s facilities and sites, Holigen’s license and/or
product applications being delayed or not completed; general
economic and stock market conditions; risks and uncertainties
detailed from time to time in Flowr’s filings with the Canadian
Securities Administrators; and many other factors beyond the
control of Flowr.
Although Flowr has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking information, there may be other factors that cause
actions, events or results to differ from those anticipated,
estimated or intended. No forward-looking information can be
guaranteed. Except as required by applicable securities laws,
forward-looking information speaks only as of the date on which it
is made and Flowr undertakes no obligation to publicly update or
revise any forward-looking information, whether as a result of new
information, future events, or otherwise.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this press release.
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