U.S.-based Green Growth seeks to acquire Aphria

The company Green Growth Brands Led by renowned distributor Peter Horvath, the company is already emerging as a leader in the cannabis market—and particularly in the CBD market—in the United States. It has also just launch a hostile tender offer to acquire the Canadian producer Aphria. The offer, directed at Aphria’s shareholders, began today and will expire on May 9 at 5:00 p.m.

The proposal

This initiative aims to transfer Aphria's capital to Green Growth. Green Growth is offering 1.57 of its shares for each Aphria share. GG Brands shares at Canadian Securities Exchange At Tuesday’s closing price of 5.98$, the offer amounts to 9.40$ per Aphria share. Aphria’s stock closed at 9.43$ the previous day at Toronto Stock Exchange, the offer somewhat undervalues the company. Furthermore, GG Brands has stated that this ratio will remain fixed and will not adjust to changes in the stock price. In total, Aphria’s estimated value under this offer is $2.35 billion.

Green Growth is presenting this potential agreement as the ideal way to combine Aphria’s production capabilities in Canada with GG Brands’ retail expertise (the executive team has worked with brands such as Victoria's Secret, American Eagle and Bath & Body Works). According to Peter Horvath, the merger of the two companies «could create the only large-scale cannabis company to bridge the U.S. and Canadian markets.» The idea is that Aphria would supply Green Growth with cannabis and finished products, which would then be distributed in the U.S. market (although current laws do not allow this) and internationally.

Another try

This isn't the first time Green Growth has launched a hostile takeover bid to merge with Aphria. The first had nevertheless been rejected by Aphria’s board of directors because it allegedly undervalued the company. Following this second offer, Aphria announced in a press release that it would establish an independent management committee to make a recommendation to the full board. «Any offer must be evaluated in light of the current and future value of our existing strategic plan,» said the company’s chairman, Irwin Simon. «We are committed to protecting Aphria’s shareholders from opportunistic offers that do not reflect the substantial value and growth prospects we have built at Aphria.».

It’s no coincidence that Green Growth is launching these operations on Aphria; the company experienced some setbacks in December: its stock price fell to $4.76 per share following allegations by two short sellers, Hindenburg Research and Quintessential Capital Management. According to them, the value of Aphria’s operations in Latin America had been overestimated. Green Growth clarified that the offer was contingent on these allegations not being substantiated.