Leamington, Ont.-based pot producer Aphria Inc. has closed a now-bigger deal to buy Latin American and Caribbean assets from international marijuana company Scythian Biosciences Corp., continuing the trend of Canadian cannabis firms expanding outside their home market.
The transaction, which was first announced in July, involves Aphria taking over LATAM Holdings Inc., a direct, wholly-owned subsidiary of Scythian. Through that purchase, Aphria has acquired stakes in cannabis-related companies in Argentina, Colombia and Jamaica, as well as the right to buy the bulk of a Brazilian producer.
The deal was expected to close on or prior to Sept. 30, 2018, a release said. But thanks to the rising share prices of pot stocks, its value has apparently increased.
Originally, Aphria was to issue to Scythian nearly 15.7 million of its shares at a “deemed” price of $12.31 apiece, “being the volume weighted average price of the Aphria shares as traded on the facilities of the TSX for the 20 trading days immediately prior to the date of the Agreement,” a release at the time said. At that share price, the acquisition would have been worth around $193 million, plus $1 million in debt being assumed by Aphria.
The terms also worked out so that Scythian would become Aphria’s largest single shareholder, with around 6.3 per cent of Aphria’s outstanding shares.
However, as of Wednesday’s close, Aphria’s stock price had risen nearly 75 per cent since the Scythian transaction was first announced. This has pushed the value of the deal up to approximately $300 million, according to Andy DeFrancesco, the chairman of Scythian’s board of directors, giving the company a “war chest” of cash going forward.
Shares of Scythian were halted Thursday morning at the request of the company, pending news.
There are several ties binding Aphria to Scythian. As of Aug. 27, Aphria owned about 1.6 per cent of Scythian’s shares, according to Bloomberg. Aphria CEO Vic Neufeld was also previously on Scythian’s board.
“With a combined population of nearly 640 million, and with significant momentum from numerous countries introducing new or modernizing existing medical cannabis legislation, the region represents a significant opportunity for long-term growth,” Neufeld said in a release on Thursday. “This acquisition firmly cements Aphria’s leadership in the region and on the global cannabis stage.”
As the Financial Post reported in July, both companies also had the backing of the Delavaco Group (where DeFrancesco is chief investment officer), a private equity firm that manages money for several wealthy Canadian families, such as the Serruya brothers of Yogen Früz fame.
“This transaction contains all of the elements we have been looking for and will help accelerate our growth trajectory and portfolio,”said Scythian CEO Rob Reid in a release. “The deal substantially enhances our funding for strategic early-stage investments.”
Aphria is not the sole Canadian cannabis producer eyeing the Latin American market. Canopy Growth Corp. unveiled a new subsidiary in July, Canopy LATAM Corp., that plans to “advance medical cannabis throughout Latin America.”
Source: Financial Post
