/NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO UNITED STATES WIRE SERVICES/
The Acquisition Will Increase Fire & Flower's Issued and In-Queue Ontario Store Count to up to 27 - Solidifying a Clear National Leadership Position
TORONTO , Nov. 2, 2020 /CNW/ - Fire & Flower Holdings Corp. (TSX: FAF) (OTCQX: FFLWF) (" FFHC ") and its wholly-owned subsidiary Fire & Flower Inc. (collectively, " Fire & Flower " or the " Company ") today announced that it has entered into a definitive share purchase agreement (the " Share Purchase Agreement ") that will result in the Company acquiring all of the issued and outstanding shares of Friendly Stranger Holdings Corp. (" Friendly Stranger "), which, at closing, is expected to own and operate 11 licensed cannabis retail stores across the province of Ontario with 4 additional cannabis stores in queue to be licensed and operational by the end of the fourth quarter of 2020 (the " Transaction ").
Upon closing, Fire & Flower is expected to have 66 stores including 18 in Ontario and an additional 9 stores in queue for licensing, giving the Company the largest footprint in both Ontario and Canada .
Pursuant and subject to the terms of the Share Purchase Agreement, as consideration the Company will issue to the shareholders of Friendly Stranger up to an aggregate of 31,117,750 common shares of FFHC (the " Consideration Shares ").
"The acquisition of Friendly Stranger is transformative for Fire & Flower and is a product of our financially disciplined approach to aggregation in the sector. It will immediately put us in a leading position in the major Ontario market, and it allows us to increase the potential of the acquired stores using the proprietary capabilities of our Hifyre™ digital retail and analytics platform" shared Trevor Fencott , Chief Executive Officer of Fire & Flower. "The acquisition will bring some of Ontario's longest established Cannabis brands into the Fire & Flower portfolio, transforming us into a multi-banner operator that appeals to a larger cross-section of cannabis customers. We are also excited to add Friendly Stranger's demonstrated expertise in the high-margin accessories business to our team. We look forward to continuing to welcome Friendly Stranger customers into these stores and to our Spark Perks™ customer engagement program that already counts more than 150,000 members across the country."
"Friendly Stranger is very pleased to be joining Fire & Flower, the leader in cannabis retail across the country," shared James Jesty , President of Friendly Stranger. Friendly Stranger will benefit from the best practices set by the market leader including their technology-enabled approach and the scale brought from their operations. Through multiple brands in the Ontario market, Fire & Flower will benefit from the ability to serve diverse customer segments in the growing cannabis market."
Upon closing of the Transaction, it is expected that the Company will acquire licenses to operate 11 cannabis retail stores currently operating in the province of Ontario under the "Friendly Stranger", "Hotbox" and "Happy Dayz" brand, including four in the key urban market of Toronto . The stores will continue to operate under the Friendly Stranger, HotBox and Happy Dayz brands.
Pursuant to the terms of the Share Purchase Agreement, an aggregate of 8,339,557 Consideration Shares will be held in escrow following closing and will, subject to certain conditions, be issued to the former shareholders of Friendly Stranger upon receipt of all applicable authorizations at additional cannabis retail store locations in each of Dundas , Midland and Cambridge , Ontario.
Closing of the Transaction is subject to the satisfaction or waiver of certain conditions, including the receipt of all required third-party and regulatory approvals (including the approval of the Toronto Stock Exchange and the Alcohol and Gaming Commission of Ontario , as applicable). The Transaction is expected to close in the fourth quarter of 2020 .
Concurrently with the entering into of the Share Purchase Agreement, the Company entered into a loan agreement with Friendly Stranger (the " Loan Agreement "). Pursuant to the terms of the Loan Agreement, Friendly Stranger may borrow from the Company up to an aggregate of $2,000,000 (the " Loan "), such amount to be used for the purchase of certain licensed cannabis retail stores operating in the province of Ontario and as contemplated in the Share Purchase Agreement. Subject to the terms of the Loan Agreement, the Loan matures on the earlier of March 31, 2021 and the date there is a change of control of Friendly Stranger (which will occur upon the completion of the Transaction). The Loan is secured against the assets of Friendly Stranger and bears interest at a rate of 1.0% per annum, which rate will be increased to 13.0% per annum in the event the Share Purchase Agreement is terminated prior to the closing of the Transaction.
Advisors
Stifel GMP is acting as financial advisor to Fire & Flower and Dentons Canada LLP is acting as its legal advisor. Broderick Capital is acting as financial advisor to Friendly Stranger and Chitiz Pathak LLP is acting as legal advisor.