Acreage Holdings, Inc. (“Acreage”) (CSE:
ACRG.U) (OTCQX: ACRGF) (FSE: 0VZ), one of the largest vertically
integrated, multi-state operators of cannabis licenses and assets
in the U.S., today announced (i) the first closing and drawdown of
$21 million on the previously announced $100 million credit
facility (the “Credit Facility”), with net proceeds of
approximately $20.2 (excluding placement fees) to Acreage, and
(ii) the borrowing of $22 million (the “Borrowed Amount”) by
an Acreage subsidiary (“IP Borrower”) from IP Investment Company,
LLC (the “Lender”) in a transaction that represents the initial
borrowing under the previously announced loan transaction (the
“Loan Transaction”). All dollar amounts referred to herein
are in U.S. dollars.
ADDITIONAL TRANSACTION
DETAILS
Credit
Facility
An Acreage subsidiary (the “Borrower”) borrowed
$21 million from an institutional lender (the “Institutional
Lender”) under the Credit Facility (the “first advance”).
Interest under the Credit Facility advances is
payable monthly as follows: (a) for the first year, 3.55% per annum
on the first advance, 1.85% per annum on the second advance, 1.55%
per annum on the third advance, and a rate to be negotiated for the
fourth advance; and (b) for the second year, a rate to be
negotiated. Advances made pursuant to the Credit Facility will be
secured by a guarantee from the IP Borrower and security over the
US$22 million of the proceeds from the Loan Transaction (the “Cash
Collateral”) which is being held in blocked account for the benefit
of the Institutional Lender.
The Borrower may draw down on the remaining
US$78,000,000 of the Credit Facility if such additional advances
are secured by cash collateral equal to the additional amounts
borrowed plus US$1,000,000 and subject to satisfaction of certain
other customary closing conditions. The Institutional Lender
does not and will not hold security in any of Acreage’s or its
subsidiaries’ other property or assets. The Credit Facility
has a two-year term and matures, subject to acceleration in certain
limited instances, on the date that is two years from the date of
the first advance.
Acreage expects to use the net proceeds of
approximately $20.2 (excluding placement fees) million from the
first advance for working capital and general corporate
purposes.
Loan
Transaction
In order to fund the Cash Collateral, Acreage
also announced that it closed on the initial borrowing under its
previously announced Loan Transaction. The financial terms of
the Loan Transaction are substantially similar to those previously
disclosed in Acreage’s prospectus supplement dated February 25,
2020 filed under Acreage’s profile on www.sedar.com (the
“Prospectus Supplement”). The maturity date for borrowings
under the Loan Transaction, subject to acceleration in certain
instances, will be 366 days from the closing date of the Loan
Transaction.
Kevin Murphy, Acreage’s Chief Executive Officer,
loaned US$21 million of the Borrowed Amount to the Lender in
connection with the Lender’s loan to the IP Borrower. Acreage
has been advised that Mr. Murphy will not be a member, an officer
nor a director of the Lender and that Mr. Murphy will be entitled
to receive, assuming full repayment of the Borrowed Amount at
maturity, $23.1 million along with up to 304,001 Acreage
subordinate voting shares. Mr. Murphy’s indirect
participation in the Loan Transaction constitutes a “related party
transaction” within the meaning of Multilateral Instrument 61-101
of the Canadian Securities Administrators, details of which were
previously disclosed in the Prospectus Supplement.
As of the closing of the initial borrowing, the
previously described provisions of the Loan Transaction relating to
the requirement to: (i) raise debt or equity capital of at least an
additional $65 million; and (ii) grant security in Acreage’s
Connecticut assets, are not applicable. Such provisions may
become applicable upon the closing of the second borrowing under
the Loan Transaction.
ABOUT ACREAGE HOLDINGS
Headquartered in New York City, Acreage is one
of the largest vertically integrated, multi-state operators of
cannabis licenses and assets in the U.S., according to publicly
available information. Acreage is dedicated to building and scaling
operations to create a seamless, consumer-focused branded cannabis
experience. Acreage debuted its national retail store brand, The
Botanist in 2018 and its award-winning consumer brands, The
Botanist and Live Resin Project in 2019.
On June 27, 2019 Acreage implemented an
arrangement under section 288 of the Business Corporations Act
(British Columbia) (the “Arrangement”) with Canopy Growth
Corporation (“Canopy Growth”). Pursuant to the Arrangement, the
Acreage articles were amended to provide Canopy Growth with an
option to acquire all of the issued and outstanding shares in the
capital of Acreage, with a requirement to do so, upon a change in
federal laws in the United States to permit the general
cultivation, distribution and possession of marijuana (as defined
in the relevant legislation) or to remove the regulation of such
activities from the federal laws of the United States (the
“Triggering Event”), subject to the satisfaction of the conditions
set out in the arrangement agreement entered into between Acreage
and Canopy Growth on April 18, 2019, as amended on May 15, 2019
(the “Arrangement Agreement”). Acreage will continue to operate as
a stand-alone entity and to conduct its business independently,
subject to compliance with certain covenants contained in the
Arrangement Agreement. Upon the occurrence or waiver of the
Triggering Event, Canopy Growth will exercise the option and,
subject to the satisfaction or waiver of certain conditions to
closing set out in the Arrangement Agreement, acquire (the
“Acquisition”) each of the Subordinate Voting Shares (following the
automatic conversion of the Class B proportionate voting shares and
Class C multiple voting shares of Acreage into Subordinate Voting
Shares) in exchange for the payment of 0.5818 of a common share of
Canopy Growth per Subordinate Voting Share (subject to adjustment
in accordance with the terms of the Arrangement Agreement). If the
Acquisition is completed, Canopy Growth will acquire all of the
Acreage Shares, Acreage will become a wholly owned subsidiary of
Canopy Growth and Canopy Growth will continue the operations of
Canopy Growth and Acreage on a combined basis. For more information
about the Arrangement and the Acquisition please see the respective
information circulars of each of Acreage and Canopy Growth dated
May 17, 2019, which are available on Canopy Growth’s and Acreage’s
respective profiles on SEDAR at www.sedar.com. For additional
information regarding Canopy Growth, please see Canopy Growth’s
profile on SEDAR at www.sedar.com.
FORWARD LOOKING STATEMENTS
This news release and each of the documents
referred to herein contains “forward-looking information” within
the meaning of applicable Canadian and United States securities
legislation. All statements, other than statements of historical
fact, included herein are forward-looking information, including,
for greater certainty, statements regarding the use of Credit
Facility proceeds, further closings under the Credit Facility and
Loan Transaction and the proposed transaction with Canopy Growth,
including the anticipated benefits and likelihood of completion
thereof.
Generally, forward-looking information may be
identified by the use of forward-looking terminology such as
“plans”, “expects” or “does not expect”, “proposed”, “is expected”,
“budgets”, “scheduled”, “estimates”, “forecasts”, “intends”,
“anticipates” or “does not anticipate”, or “believes”, or
variations of such words and phrases, or by the use of words or
phrases which state that certain actions, events or results may,
could, would, or might occur or be achieved. There can be no
assurance that such forward-looking information will prove to be
accurate, and actual results and future events could differ
materially from those anticipated in such forward-looking
information. This forward-looking information reflects Acreage’s
current beliefs and is based on information currently available to
Acreage and on assumptions Acreage believes are reasonable.
Forward-looking information is subject to known and unknown risks,
uncertainties and other factors that may cause the actual results,
level of activity, performance or achievements of Acreage to be
materially different from those expressed or implied by such
forward-looking information. Such risks and other factors may
include, but are not limited to: the ability of the parties to
receive, in a timely manner and on satisfactory terms, the
necessary regulatory approvals; the available funds of Acreage and
the anticipated use of such funds; the availability of financing
opportunities; the ability of Acreage and Canopy Growth to satisfy,
in a timely manner, the conditions to the completion of the
Acquisition; the likelihood of completion of the Acquisition; other
expectations and assumptions concerning the transactions
contemplated between Acreage and Canopy Growth; legal and
regulatory risks inherent in the cannabis industry; risks
associated with economic conditions, dependence on management and
currency risk; risks relating to U.S. regulatory landscape and
enforcement related to cannabis, including political risks; risks
relating to anti-money laundering laws and regulation; other
governmental and environmental regulation; public opinion and
perception of the cannabis industry; risks related to contracts
with third-party service providers; risks related to the
enforceability of contracts; reliance on the expertise and judgment
of senior management of Acreage; risks related to proprietary
intellectual property and potential infringement by third parties;
the concentrated voting control of Acreage’s founder and the
unpredictability caused by Acreage’s capital structure; risks
relating to the management of growth; increasing competition in the
industry; risks inherent in an agricultural business; risks
relating to energy costs; risks associated to cannabis products
manufactured for human consumption including potential product
recalls; reliance on key inputs, suppliers and skilled labor;
cybersecurity risks; ability and constraints on marketing products;
fraudulent activity by employees, contractors and consultants; tax
and insurance related risks; risks related to the economy
generally; risk of litigation; conflicts of interest; risks
relating to certain remedies being limited and the difficulty of
enforcement of judgments and effect service outside of Canada;
risks related to future acquisitions or dispositions; sales by
existing shareholders; and limited research and data relating to
cannabis. A description of additional assumptions used to develop
such forward-looking information and a description of additional
risk factors that may cause actual results to differ materially
from forward-looking information can be found in Acreage’s
disclosure documents, including the Circular and Acreage’s Annual
Information Form for the year ended December 31, 2018 filed on
April 29, 2019, on the SEDAR website at www.sedar.com.
Although Acreage has attempted to identify important factors that
could cause actual results to differ materially from those
contained in forward-looking information, there may be other
factors that cause results not to be as anticipated, estimated or
intended. Readers are cautioned that the foregoing list of factors
is not exhaustive. Readers are further cautioned not to place undue
reliance on forward-looking information as there can be no
assurance that the plans, intentions or expectations upon which
they are placed will occur. Forward-looking information contained
in this news release is expressly qualified by this cautionary
statement. The forward-looking information contained in this news
release represents the expectations of Acreage as of the date of
this news release and, accordingly, is subject to change after such
date. However, Acreage expressly disclaims any intention or
obligation to update or revise any forward-looking information,
whether as a result of new information, future events or otherwise,
except as expressly required by applicable securities law.
Neither the Canadian Securities Exchange nor its
Regulation Service Provider has reviewed and does not accept
responsibility for the adequacy or accuracy of the content of this
news release.
Media Contact: |
Investor Contact: |
Howard Schacter Vice President
of Communications h.schacter@acreageholdings.com 646-600-9181 |
Steve West Vice President,
Investor Relations Investors@acreageholdings.com 646-600-9181 |
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