/NOT FOR DISSEMINATION IN THE UNITED
STATES OR FOR DISTRIBUTION TO UNITED
STATES WIRE SERVICES/
Equity investment of approximately $19
Million by Alimentation Couche-Tard, resulting in
approximately 15% ownership of Fire & Flower in support of
continued retail expansion
EDMONTON, AB, July 23, 2020 /CNW/ - Fire & Flower Holdings
Corp. ("Fire & Flower" or the "Company")
(TSX: FAF) (OTCQX: FFLWF), today announced that it has entered
into an amendment agreement (the "Amendment Agreement") with
respect to certain amendments (the "Amendments") to the
securities of the Company issued to an indirect wholly-owned
subsidiary of Alimentation Couche-Tard Inc. (collectively,
"ACT").
Highlights of Proposed Amendments
- Cash commitment by ACT of approximately $19 million in 2020 in connection with the
exercise of certain amended Series A warrants.
- Increased operational flexibility by extending maturity
date of ACT's $25,989,985 principal
amount 8.0% convertible unsecured debentures (the "ACT
Debentures") by two years to June 30,
2023 and amending the maturity date of the April 2020 Debentures (as defined below) to
June 1, 2022.
- Market-based re-pricing to a maximum of $1.875 for the Series B warrants and $3.00 or a potential 25% premium to market for
the Series C warrants.
"We are pleased with the proposed amendments to the strategic
investment by Alimentation Couche-Tard and believe this will
continue to build our strategic relationship," shared Trevor Fencott, Chief Executive Officer of Fire
& Flower. "With our close relationship with Couche-Tard
including our co-located pilot stores, our path towards positive
operating EBITDA, the removal of near-term debt maturities and a
continued strengthened cash position to fund store expansion, we
are positioned as a leader in Canadian cannabis retail."
"Alimentation Couche-Tard continues to be pleased with the
progress that is being made by Fire & Flower and the amendments
to the strategic investment demonstrate our commitment to the
Company," shared Stéphane Trudel,
Senior Vice President, Operations with Alimentation Couche-Tard.
"In addition to the amendments to the strategic investment, we will
continue to work closely with Fire & Flower and
support the Company's ambitious growth plans"
Background
On August 7, 2019, the Company
issued to ACT:
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(a)
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$25,989,985 principal
amount of ACT Debentures that are convertible into an aggregate of
24,289,706 common shares in the capital of the Company (the
"Common Shares") at a price of $1.07 per Common Share
(the "Conversion Price"). The ACT Debentures mature on June
30, 2021, subject to the Company having the ability to accelerate
the maturity date to as early as December 31, 2020 under certain
circumstances (collectively, the "Maturity Date"). The ACT
Debentures also contemplate certain circumstances whereby the
Company may force the conversion of the then outstanding principal
amount of ACT Debentures (and the accrued and unpaid interest
thereon) on the Maturity Date at a Conversion Price equal to 95% of
the 20-day volume weighted average price (the
"VWAP") of the Common Shares on the Maturity
Date;
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(b)
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30,634,322 series A
common share purchase warrants (the "Series A Warrants")
with each Series A Warrant entitling ACT to acquire one (1)
additional Common Share at a price of $1.40 per share until the
date which is 90 days after the earlier of (i) June 30, 2021; and
(ii) the later of (A) December 31, 2020; and (B) the date the
Company accelerates the Maturity Date pursuant to the terms of the
ACT Debentures;
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(c)
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56,126,890 series B
common share purchase warrants (the "Series B Warrants")
with each Series B Warrant entitling ACT to acquire one (1)
additional Common Share at a price of $1.875 per share until the
date that is one (1) year from the date all of the Series A
Warrants have been exercised (noting that the Series B Warrants
expire if the Series A Warrants expire unexercised); and
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(d)
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110,703,925 series C
common share purchase warrants (the "Series C Warrants" with
the ACT Debentures, the Series A Warrants and the Series B
Warrants, the "ACT Securities") with each Series C Warrant
entitling ACT to acquire one (1) additional Common Share at a price
per share equal to the lesser of (i) $6.00; and (ii) the greater of
(A) $2.00; and (B) the 20-day VWAP of the Common Shares on the last
business day prior to the exercise of the Series C Warrants. The
Series C Warrants expire on the earlier of: (i) the date that is
one (1) year from the date all of the Series B Warrants have been
exercised; and (ii) August 7, 2023 (noting that the Series C
Warrants expire if the Series B Warrants expire
unexercised).
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The conversion and exercise, as applicable, in full of all of
the ACT Securities would have resulted in ACT owning approximately
50.1% of the Common Shares on a fully-diluted basis (the
"Ownership Interest") at the time of issuance of the ACT
Securities. Pursuant to the terms of the investor rights agreement
between the Company and ACT dated August 7,
2019 (the "IRA") and in order for ACT to maintain its
Ownership Interest, the Company issued to ACT an additional (a)
3,523,705 Series A Warrants; (b) 11,048,651 Series B Warrants; and
(c) 22,686,864 Series C Warrants, as a result of ACT exercising its
participation right in connection with the Company's private
placement of secured convertible debentures (the "April 2020 Debentures") and subscription
receipts which closed on April 28,
2020 (the "April 2020
Private Placement"). ACT also purchased $1,960,000 principal amount of April 2020 Debentures and 515 subscription
receipts (which have since been converted into $515,000 principal amount of April 2020 Debentures) pursuant to the
April 2020 Private Placement.
Proposed Amendments
Pursuant to the terms of the Amendment Agreement, the Company
and ACT propose to amend the terms of the ACT Securities, which
amendments include, but are not limited to, the following:
(a) The ACT Debentures would be amended such
that:
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(i)
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The Conversion Price
would be the lesser of: (A) the 20-day VWAP of the Common Shares on
the last trading day prior to ACT delivering a notice of its
intention to convert; and (B) $0.90;
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(ii)
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The Maturity Date
would be June 30, 2023, provided that if less than an aggregate of
$20,000,000 principal amount of April 2020 Debentures has been
converted prior to the maturity date thereof (as may be amended
from time to time) (collectively, the "April 2020 Debenture
Maturity Date"), then ACT would have the right to accelerate
the Maturity Date to a date that is 60 days following the April
2020 Debenture Maturity Date;
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(iii)
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The Company would
have the ability to repay the principal amount of the ACT
Debentures and interest thereon by issuing Common Shares at a price
equal to $0.75 per Common Shares (subject to satisfaction of
certain conditions precedent, including the Common Shares having a
20-day VWAP of at least $1.00 on the date the Company gives its
notice of intention to convert); and
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(iv)
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The Company would
have the ability to repay the principal amount of ACT Debentures
(with a three (3) month penalty) if (A) ACT does not exercise all
of the Series B Warrants on or before the expiry date of the Series
B Warrants; or (B) ACT does not fulfil any of its Series A
Warrant Obligations (as defined herein);
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(b) The Series A Warrants would be amended such
that:
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(i)
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13,146,469 of the
Series A Warrants (the "A-1 Warrants") would have an
exercise price equal to $0.78. As part of the Amendments, ACT has
agreed to exercise all of the A-1 Warrants by no later than the
date which is three (3) business days following the date the
Amendments become effective, provided that no default or event of
default under the ACT Debentures has occurred and is continuing
(the "A-1 Obligation");
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(ii)
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10,505,779 of the
Series A Warrants (the "A-2 Warrants") would have an
exercise price equal to $0.83. As part of the Amendments, ACT has
agreed to exercise all of the A-2 Warrants by no later than
December 31, 2020 provided that no default or event of default
under the ACT Debentures has occurred and is continuing (the
"A-2 Obligation"); and
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(iii)
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10,505,779 of the
Series A Warrants (the "A-3 Warrants") would have an
exercise price equal to $0.93. The A-3 Warrants will expire on June
30, 2021 (as may be extended) (the "Series A Expiry
Date"). The A-3 Warrants would be exercisable at ACT's
option, without any impact to the Series B and Series C Warrants,
unless ACT delivers a notice to the Company prior to January 18,
2021 stating its intent at such time to exercise any number of A-3
Warrants on or before the Series A Expiry Date, in which case ACT
will be required to exercise such number of A-3 Warrants prior to
exercising the Series B and Series C Warrants (together with the
A-1 Obligation and the A-2 Obligation, the "Series A Warrant
Obligations").
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Upon the exercise of the Series A-1 Warrants and A-2 Warrants,
ACT would have an approximate 14.98% ownership interest in Fire
& Flower, based on the Company's current issued and outstanding
Common Shares and assuming that no additional Common Shares are
acquired by ACT (or issued by the Company) prior to any such
exercise and no adjustments to the Series A-1 Warrants and Series
A-2 Warrants have occurred.
(c) The Series B Warrants would be amended such
that:
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(i)
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The exercise price of
the Series B Warrants would be the lesser of: (A) $1.875; and (B)
the 20-day VWAP of the Common Shares on the last trading day prior
to the date on which the Series B Warrants are
exercised;
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(ii)
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The Series B Warrants
would only be exercisable at any time after January 1, 2022;
and
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(iii)
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The expiry date of
the Series B Warrants would be September 30, 2022 (the "Series B
Expiry Date");
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(d) The Series C Warrants would be amended such
that:
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(i)
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The exercise price of
the Series C Warrants would be the lesser of: (A) $3.00; and (B)
125% of the 20-day VWAP of the Common Shares on the last trading
day prior to the date on which the Series C Warrants are
exercised;
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(ii)
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The Series C Warrants
would only be exercisable at any time after October 1, 2022;
and
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(iii)
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The expiry date of
the Series C Warrants would be June 30, 2023.
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The expiry date of all Series A Warrants, Series B Warrants and
Series C Warrants would be extended in the event that the Company
is in default of certain debt obligations, if and as applicable. In
such event of default, the expiry date of such warrants would be
extended to the date that is 75 days in the case of the Series A
Warrants or 30 days in the case of the Series B Warrants and Series
C Warrants after such default has been cured pursuant to the terms
of the applicable debt instrument.
Notwithstanding the foregoing, all Warrants would immediately
expire in the event ACT does not fulfil any of its Series A Warrant
Obligations.
Investor Rights Agreement
The IRA would be amended to consider the aforementioned
Amendments to the ACT Securities. The participation right and top
up right of ACT as contemplated by the IRA would be maintained. The
IRA would also be amended such that:
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(a)
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Subject to certain
allowances, the Company would be restricted from incurring
additional senior debt without the consent of ACT; and
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(b)
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The IRA may be
terminated by the Company in the event ACT does not fulfil any of
its Series A Warrant Obligations.
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Amendments to April 2020
Debentures
In addition to the Amendments, the Company and Computershare
Trust Company of Canada
("CTCC") have entered into a supplemental debenture
indenture (the "Supplemental Indenture") to the
debenture indenture entered into between the Company and CTCC dated
April 28, 2020 (the
"Indenture") which governs the April
2020 Debentures. The Supplemental Indenture amends the
Indenture such that:
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(a)
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the April 2020
Debenture Maturity Date shall be amended to June 1, 2022 from June
1, 2021 (or April 28, 2022 in the event certain conditions
precedent were achieved);
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(b)
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the Company's
election to force the conversion of the principal amount of April
2020 Debentures shall no longer be contingent on the conversion or
retirement of the ACT Debentures; and
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(c)
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subject to the
approval of the holders of the Common Shares, the Company may elect
to add any interest accrued and payable on the December 31, 2021
payment date to the principal amount of April 2020 Debentures (as
is already contemplated for the interest payments owing on December
31, 2020 and June 30, 2021) (the "Interest
Amendment").
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As set out above, the Interest Amendment is subject to the
approval of the shareholders of the Company, but the other
amendments contemplated by the Supplemental Indenture are effective
as of the date hereof.
Fire & Flower Board Recommendation
The board of directors of the Company (the "Board"),
after consultation with its legal and financial advisors, has
unanimously determined that the Amendments are in the best interest
of Fire & Flower, Stéphane Trudel having declared his interest and
abstained from voting thereon where required by applicable law. In
making this determination, the Board considered a number of
factors, including a fairness opinion from ATB Capital Markets Inc.
that, based upon and subject to the assumptions, qualifications and
limitations as set out in such fairness opinion, as of such date,
the financial terms of the Amendments are fair, from a financial
point of view, to the Company.
Conditions Precedent
The Amendments are subject to customary conditions precedent and
applicable regulatory approvals, including the receipt of approval
by the disinterested holders of Common Shares as required by the
policies of the TSX. The Company intends to seek the
requisite shareholder approval at a special meeting of shareholders
expected to be held in September
2020.
Voting Support Agreements
Concurrent with the entering into of the Amendment Agreement,
certain directors, officers and shareholders of the Company have
entered into voting support agreements pursuant to which such
parties have agreed to vote an aggregate of 28,819,270 Common
Shares in favour of the Amendments, representing approximately
17.86% of the issued and outstanding Common Shares.
Advisors
Dentons Canada LLP is acting as legal advisor to Fire &
Flower. ATB Capital Markets Inc. provided a fairness opinion that,
based upon and subject to the assumptions, qualifications and
limitations set out therein, the financial terms of the Amendments
are fair, from a financial point of view, to the Company.
Davies Ward Phillips &
Vineberg LLP is acting as legal advisor to ACT.
Additional Information
Copies of the Amendment Agreement and the agreements attached
thereto as exhibits, including the form of amended and restated ACT
Debenture certificate, the forms of amended and restated Warrant
certificates and the form of amended and restated IRA, will be
filed on the Company's profile on SEDAR at www.sedar.com. The above
descriptions of the terms and conditions of the Amendment Agreement
and the agreements attached thereto as exhibits, are qualified in
their entirety by the terms of the Amendment Agreement.
About Fire & Flower
Fire & Flower is a leading purpose-built, independent
adult-use cannabis retailer poised to capture significant Canadian
market share. The Company guides consumers through the complex
world of cannabis through education-focused, best-in-class
retailing while the Hifyre™ digital platform and Spark Perks™
program connect cannabis consumers with the latest cannabis
products and deliver cutting edge insights into evolving consumer
behaviours. The Company's leadership team combines extensive
experience in the cannabis industry with strong capabilities in
retail operations.
Fire & Flower Holdings Corp. owns all of the issued and
outstanding shares in Fire & Flower Inc., a licensed cannabis
retailer that owns cannabis retail store licences in the provinces
of Alberta, Saskatchewan, Manitoba and Ontario and the Yukon territory.
Through its strategic investment with ACT, the Company has set
its sights on the global expansion as new cannabis markets
emerge.
More information on Fire & Flower can be found at
www.fireandflower.com.
About Alimentation Couche-Tard Inc.
Couche-Tard is the leader in the Canadian convenience store
industry. In the United States, it
is the largest independent convenience store operator in terms of
the number of company-operated stores. In Europe, Couche-Tard is a leader in convenience
store and road transportation fuel retail in the Scandinavian
countries (Norway, Sweden and Denmark), in the Baltic countries (Estonia, Latvia and Lithuania), as well as in Ireland, and has an important presence in
Poland.
In addition, under licensing agreements, more than 2,300 stores
are operated under the Circle K banner in 15 other countries and
territories (Cambodia,
Egypt, Guam, Guatemala, Honduras, Hong
Kong, Indonesia,
Jamaica, Macau, Mexico, Mongolia, New
Zealand, Saudi Arabia, the
United Arab Emirates and
Vietnam), which brings the
worldwide total network to nearly 14,500 stores.
https://corpo.couche tard.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This news release contains certain
forward-looking information within the meaning of applicable
Canadian securities laws ("forward-looking statements"). All
statements other than statements of present or historical fact are
forward-looking statements. Forward-looking statements are often,
but not always, identified by the use of words such as
"anticipate", "achieve", "could", "believe", "plan", "intend",
"objective", "continuous", "ongoing", "estimate", "outlook",
"expect", "project" and similar words, including negatives thereof,
suggesting future outcomes or that certain events or conditions
"may" or "will" occur. These statements are only
predictions. Forward-looking statements in this news release,
include, but are not limited to, statements in respect of
the Amendments and Interest Amendment receiving all requisite
approvals, the conversion and exercise of certain securities of the
Fire & Flower and the expansion of Fire & Flower's business
operations.
Forward-looking statements are based on the opinions and
estimates of management of Fire & Flower at the
date the statements are made based on information then available to
the Fire & Flower. Various factors and
assumptions are applied in drawing conclusions or making the
forecasts or projections set out in forward-looking
statements. Forward-looking statements are subject to and
involve a number of known and unknown, variables, risks and
uncertainties, many of which are beyond the control of Fire
& Flower, which may cause Fire &
Flower's actual performance and results to differ materially
from any projections of future performance or results expressed or
implied by such forward-looking statements. Such factors,
among other things, include: final
regulatory and other approvals or
consents; fluctuations in general macroeconomic
conditions; fluctuations in securities markets; the impact of the
COVID-19 pandemic; the ability of the
Company to successfully achieve its business objectives
and political and social uncertainties.
No assurance can be given that the expectations reflected in
forward-looking statements will prove to be correct. Although
the forward-looking statements contained in this news release are
based upon what management of the Company believes, or believed at
the time, to be reasonable assumptions, the Company cannot assure
shareholders that actual results will be consistent with such
forward-looking statements, as there may be other factors that
cause results not to be as anticipated, estimated or intended.
Readers should not place undue reliance on the forward-looking
statements and information contained in this news release.
Additional information regarding risks and uncertainties relating
to the Company's business are contained under the heading "Risk
Factors" in the Company's annual information form dated
April 29, 2020 and the heading "Risks
and Uncertainties" in the management discussion and analysis for
the fifty-two weeks ended February 1,
2020 filed on its issuer profile on SEDAR at
www.sedar.com.
No stock exchange, securities commission or other regulatory
authority has approved or disapproved the information contained
herein.
Fire & Flower assumes no obligation to publicly
update or revise forward-looking statements to reflect new
information, future events or otherwise, except as expressly
required by applicable law.
SOURCE Fire & Flower Holdings Corp.