It was a tumultuous month for Aphria Inc. In this September 20, 2018, file photography, marijuana plants in the process of propagation, aspire to a worker at Aphria objects Leamington.
News of the potential buy-out bid for the Saxon giant Aphria Inc. on Friday caused a major downturn in the market, but Lemmington-based sliding giant leaders are skeptical that the move from Ohio-based marijuana, Green Growth Brands, would be a good thing shareholders.
"While we appreciate the interest of GGB for the value we created in Aqra and our significant growth prospects, their proposal does not reward our shareholders for participating in such a transaction," said Irvine Simon, who was appointed new chairman of the Aphria board after green growth brands announced their offer on Thursday afternoon.
Simon, an entrepreneur with experience in the processed food industry, replaced Vic Neifeld as chairman of the board. Neufeld remains chief executive of Africa.
The Canadian marijuana manufacturer, through its new president, announced on Friday that the company's shareholders should drop the attempt to host a takeover.
"The proposed offer is quite risky, given the requirement for GGB to complete financial intermediation at a price that is twice as high as the average of their share price as a key expression for the proposal," Simon said.
However, in the next few weeks, in the next few weeks, it intends to make a formal offer for Aphria, estimating the marijuana producer to $ 2.8 billion.
The Ohio company said Afry's shareholders would receive 1.5714 shares of "green growth" for each of their shares. That's equal to the 45.5 percent premium in relation to Aphria's closing price of $ 6.19 at the Toronto Stock Exchange on December 24.
Aphria's shareholders will receive a value of $ 11 per share – much above the closing prices on Thursday from $ 7.57.
The company's shares jumped $ 8.65 after opening the market on Friday morning, ending their trading day at $ 8.52 and valuing the company at $ 1.88 billion. Even with that incentive, the value of Afria's shares remains at less than half of what they were on October 17th, the day of recreational marijuana became legal in Canada.
The GGB acquisition agreement is still subject to numerous conditions if the shareholders of both companies will ever vote.
"The board found that the GGB proposal, as it currently stands, greatly underestimates the company," Irwin said. "Afria has a huge market opportunity as a leader in the sector and a strategic vision to meet those opportunities. Our focus is to achieve this value in the benefit of all our shareholders."
Neufeld remains a board member in Africa. He did not respond on Friday to the messages left by the star.
Nigel, Africa's top executive, is also one of the five members of Green Acre Capital's "Advisory Board", a private investment firm that invests in the production of cannabis, research and retailers – including a significant investment in green growth brands.
It further bypasses the potential offer: Afria also announced on Friday that it is "holding a passive investment" in the Green Acres Capital Fund II, which we understand has invested in a number of new cannabis companies, including GGB. "
Green Growth CEO Peter Horvath said the hostile takeover bid came after the official powers to take control of Afry were rejected.
Bids for takeover directly to the shareholders – without the approval of the board of directors of the target company – are considered hostile offers. Shareholders of each company are expected to receive information about the offer soon if it becomes official.
"We announced our intention to offer a few weeks before actually submitting the offer, because at that time we believe that the value of our company will be fully known," Horvat said in a televised interview with BNN Bloomberg on Friday.
"We have a decade of experience that makes this type of work (corporate retail and management) in different formats." Cannabis is just another category that can happen. "We think (Aphria) has incredible breeding capacity and it's time to deliver contracts to supply ".
Another primary investor in the Green Growth brands is the Schottenstein family, which has a history of ownership in the retail business, including the American Eagle, Victoria Secret and others.
Horvat was the chief executive officer of these companies over the years and believes that combining managerial skills of both entities may prove useful in the cannabis industry.
"We have respect for their team and assets in Canada," Horvat said. "We think that their team is strong and the combination with our team makes sense.
"We believe that this is a great opportunity and we will let our shareholders answer them. The decision will be made by the shareholders and that's how it will be played."
Afria has noted in recent weeks its share value following a report critical to some of its acquisitions. Short sellers of Quintessential Capital Management and Hindenburg Research earlier this month challenged the company's value based on recent acquisitions in Colombia, Jamaica and Argentina.
Horvat said that, regardless of any information about these transactions, "green growth" brands made their offer strictly on the basis of Africa's operations in Canada.
Afria announced on Friday that it has created an independent board of directors to review all the formal offers it receives.
Afria earlier this month announced that he had appointed a "special committee" to review the recent acquisition of its Latin American funds.