Cannabis producer Aphria just rejected Green Growth Brands' $2 billion hostile-takeover bid

marijuanaDevin Melnyk, a long-time marijuana grower and a consultant with Pure Sunfarms, holds trimmed marijuana as it comes out of a high-volume cannabis trimming machine at a massive tomato greenhouse being renovated to grow pot in Delta, British ColumbiaAP Photo/Ted S. Warren

  • Aphria on Wednesday said it has rejected Green Growth Brands' hostile-takeover bid.
  • Green Growth Brands late last month said it filed an offer to acquire all Aphria outstanding common shares through an all-stock deal that would give Aphria shareholders 1.5714 common shares of Green Growth for each of their shares.
  • Aphria said the proposal undervalued the company, reflecting a 23% discount to its average share price over the same period.
  • Watch Aphria trade live.

The Canadian cannabis producer Aphria was down 7% Wednesday after the company rejected Green Growth Brands' hostile-takeover bid.

Green Growth, a US-based marijuana company, on January 23 offered to acquire all Aphria outstanding common shares through an all-stock deal. The offer would have given Aphria shareholders 1.5714 common shares of its stock for each Aphria share. Green Growth first announced its intention to make a takeover bid on December 27, 2018, valuing the marijuana producer at 2.8 billion Canadian dollars ($2.06 billion).

Aphria on Wednesday said it has rejected the bid because Green Growth's proposal undervalued the company, reflecting a 23% discount to its average share price over the same period.

"The Aphria Board of Directors unanimously believes that GGB's hostile offer is significantly undervalued and inadequate and not in the interest of Aphria shareholders on multiple grounds," said Irwin D. Simon, Aphria's independent Board Chair in a press release.

"By virtue of our strong platform and competitive advantages, Aphria has multiple near-term opportunities to profitably grow and create substantial value for its shareholders. These include expanding production and automation to secure long-term cost and scale advantages, expanding in the global medical-use market in Europe, Latin America and the Caribbean, acquisition of increased market share in the Canadian adult-use markets, and developing new products for the burgeoning cannabis health and wellness sector. A hostile takeover by GGB ignores this bright outlook, which is another reason why the Aphria Board strongly urges shareholders to reject the bid."

Other weed stocks were also lower on Wednesday, including Cronos Group (-6.02%), Aurora Cannabis (-3.29%), Tilray (-4.07%) and Canopy Growth(-4.98%).

Aphria listed on the New York Stock Exchange in November, transferring from Canadian markets. Shares exploded by as much as 155% in August and September as tobacco giants such as Imperial Brands and beverage companies such as Constellation Brands triggered a "green rush" by entering the cannabis space.

The stock crashed in December after short-seller Quintessential Capital Management's Hindenburg Research alleged the company was a "shell game with a cannabis business on the side." The firm accused Aphria of announcing acquisitions in July that were "largely worthless," and said they were used to divert as much as $700 million, or nearly half of its total net assets. Aphria denied the allegations.

On January 11, Quintessential declared victory after the cannabis producer said its CEO and one of its cofounders were transitioning out of leadership roles.
Aphria was down 16% since going public, trading near $9.96 a share on Wednesday.

APHAMI

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