Post by
newcoin on Oct 09, 2021 10:57am
From Bloomberg
"Alberta-based cannabis producer Sundial Growers Inc. made a splash late Thursday after announcing it would buy liquor-and-pot retailer Alcanna Inc. for $346 million in an all-stock deal.
However, the deal raises some questions on how the producer - perhaps better known for being spotlighted as a meme-stock than for its products in the Canadian market - will abide by provincial regulations.
Sundial said Thursday it will issue about 405 million shares to acquire Alcanna, which operates 171 liquor stores and has a 63 per cent stake in Nova Cannabis, a pot shop retailer with 62 locations across Alberta, Saskatchewan, and Ontario. The deal is expected to close as early as Dec., pending various provincial regulatory approvals, and would give Sundial an additional $16.4 million in annual cash flow, while incurring another $15 million in annual EBITDA savings.
The acquisition would also place Sundial firmly atop the Canadian cannabis retail sector with it able to either own or operate through a franchise agreement 170 stores. Placing Nova Cannabis under its control would see Sundial's brands enjoy "significant incremental shelf space", the company said in a presentation deck.
However, current Ontario regulations forbid licensed producers from owning more than 25 per cent of a retailer's voting shares and more than 50 per cent of the beneficial interest of the fair value of a store. While some companies have found a novel workaround to that restriction, namely through employing a franchise model that Canopy Growth Inc.'s Tokyo Smoke uses with the Katz Group, it is unknown how Sundial plans to manage the seven Nova Cannabis-owned stores that operate in Ontario.
"We will structure the combined business to be compliant with all laws and regulations in each jurisdiction in which we operate," said Sophie Pilon, head of corporate communications at Sundial, in an email.
A representative from the Alcohol and Gaming Commission of Ontario said it hasn't received an application for transfer of sale from the licensee yet to "properly assess their eligibility".. A statement from Nova Cannabis said the company will work with Sundial and provincial regulators "to ensure the Company remains fully compliant with the various provincial regulatory frameworks". ..."