SMITHS FALLS, ON and TORONTO, July 10, 2018 /CNW/ - Canopy Growth Corporation ("Canopy Growth") (TSX:WEED) (NYSE:CGC) and Hiku Brands
Company Ltd. ("Hiku") (CSE:HIKU) (together, the "Companies") are pleased to announce that they have entered into a definitive
arrangement agreement (the "Agreement") pursuant to which Canopy Growth will acquire all of the issued and outstanding common
shares of Hiku (the "Transaction").
Under the terms of the Agreement, Hiku shareholders will receive 0.046 of a Canopy Growth common share (each whole share, a
"Canopy Share") in exchange for each common share of Hiku (each, a "Hiku Share"), representing the equivalent of C$1.91 per Hiku Share and a premium of 33% based on the 20-day volume weighted average prices of the Canopy
Shares and the Hiku Shares as of July 9, 2018, and a premium of approximately 21% based on the
closing prices of the Canopy Shares on the Toronto Stock Exchange ("TSX") and the Hiku Shares on the Canadian Stock Exchange
("CSE") on July 9, 2018.
"Hiku equals brands. Canopy is built on brands. So we combined them," said Bruce Linton,
Chairman & CEO, Canopy Growth, in haiku.
Alan Gertner, Chief Executive Officer of Hiku said: "This Transaction represents an incredible
step in the Hiku journey that both realizes immediate benefits for our shareholders and at the same time provides an unparalleled
opportunity to join forces with a preeminent global cannabis player. Ultimately, together we will continue to build one of the
world's most engaging and successful cannabis retail and brand business. Canopy is a truly special cannabis company that is well
positioned to lead both in Canada and around the world."
Transaction Highlights:
- Secures an Immediate Attractive Premium for Hiku Shareholders: The Transaction provides Hiku shareholders
with a premium of 33% based on the 20-day volume weighted average prices of the Canopy Shares and the Hiku Shares as of
July 9, 2018, and a premium of 21% based on the closing prices of the Canopy Shares on the TSX
and the Hiku Shares on the CSE on July 9, 2018.
- Strengthening a Leading Vertically Integrated Global Cannabis Company: Canopy Growth is a leading
diversified global cannabis company and market leader with distinct brands and an award-winning product portfolio that spans
federally legal markets around the globe in both medical and recreational segments. This transaction strengthens the diversity
and range of brands in the portfolio and improves access to multiple demographic segments.
- Integration of Retail Operations: The Transaction provides Canopy Growth and Hiku with an integration and
expansion opportunity with respect to retail stores in provinces where direct consumer sales will be permitted pursuant to the
Cannabis Act, including a pipeline of growth opportunities.
- Complimentary Portfolio of Brands: The Transaction provides Canopy Growth and Hiku with the opportunity
to leverage a combined portfolio of established brands through their respective retail stores across the country and thereby
generate incremental opportunities with distributors.
- Alignment with Strong Management Team: Hiku's strong management team brings best-in-class retail, design
and marketing experience, which are well aligned with and further supplements Canopy's existing strategy and operations.
- Strong Access to and Immediate Availability of Capital: Canopy Growth recently closed the issuance of
convertible notes amounting to $600 million in gross proceeds. This capital and liquidity will
support both Companies continued expansion efforts
- Continued Participation in Expanded Platform for Future Growth: Hiku shareholders, through their
ownership of Canopy Shares, will have the opportunity to participate in the growth of Canopy Growth and will benefit from the
enhanced growth prospects of the combined company. The Transaction will provide substantial infrastructure and operational
support to accelerate Hiku's growth strategy, future product development and innovation, together with Canopy Growth and its
global partners.
- Enhanced Liquidity and Capital Markets Profile: Canopy Growth is listed on both the New York Stock
Exchange ("NYSE") and the TSX. Canopy Shares are highly liquid with an average daily trading volume of approximately 5.4
million shares, representing approximately C$197 million on a daily basis over the last three
months.
Additional Transaction Details
The Transaction will be carried out by way of a court-approved plan of arrangement under the Business Corporations Act
(British Columbia) and will require the approval of at least 66 2/3% of the votes cast by the
shareholders of Hiku at a special meeting expected to take place in August 2018 (the "Meeting"). In
addition to Hiku shareholder approval, the Transaction is subject to applicable regulatory, court and stock exchange approvals
and certain other closing conditions customary in transactions of this nature. No approval of Canopy Growth shareholders is
required in connection with the Transaction.
The board of directors of Hiku (the "Hiku Board") has unanimously approved the Agreement and recommends that shareholders of
Hiku vote IN FAVOUR of the Transaction. A management information circular will be mailed to shareholders in connection with the
Meeting. BMO Capital Markets and INFOR Financial Inc. have each provided an opinion to the Hiku Board to the effect that, based
upon and subject to the assumptions, limitations, and qualifications in such opinions, the consideration to be received pursuant
to the Agreement is fair, from a financial point of view, to Hiku shareholders.
Each of the directors and senior officers of Hiku, who hold in aggregate 28.5% of the issued and outstanding Hiku Shares, have
entered into voting support agreements with respect to the Transaction pursuant to which, among other things, they have agreed to
vote in favour of the Transaction at the Meeting.
The board of directors of Canopy Growth (the "Canopy Board") has unanimously approved the Agreement. Greenhill & Co.
Canada Ltd. ("Greenhill") has provided an opinion to the Canopy Board that, subject to the assumptions, limitations and
qualifications set out in such opinion, the exchange ratio provided for in the Agreement is fair, from a financial point of view,
to Canopy Growth.
The Agreement includes certain non-solicitation covenants subject to the right of Hiku to accept a superior proposal in
certain circumstances, with Canopy Growth having a five-business day right to match any such superior proposal received by Hiku.
The Agreement also provides for the payment of a C$15 million termination fee, if the Transaction
is terminated in certain specified circumstances.
On July 10, 2018, the Hiku Board unanimously determined, after receiving the advice of its
financial and legal advisors, that the Transaction constitutes a "Superior Proposal" pursuant to the arrangement agreement
between Hiku and WeedMD Inc. ("WeedMD") originally announced on April 19, 2018 (the "WeedMD
Agreement"). The Hiku Board provided notice of that determination to WeedMD. WeedMD has waived its "right to match" the
proposal by Canopy Growth. Accordingly, the WeedMD Agreement has been terminated and Hiku has paid a termination fee of
C$10 million to WeedMD pursuant the terms of the WeedMD Agreement. Canopy has advanced Hiku the
funds to pay the termination fee pursuant to a promissory note.
Advisors and Counsel
Cassels Brock & Blackwell LLP is acting as legal counsel to Canopy Growth. XIB Financial
and Greenhill acted as financial advisors to Canopy Growth and Greenhill has provided a fairness opinion to the Canopy Board.
Wildeboer Dellelce LLP is acting as legal counsel to Hiku. BMO Capital Markets is acting as financial advisor to Hiku and BMO
Capital Markets and INFOR Financial Inc. have each provided a fairness opinion to the Hiku Board.
About Canopy Growth Corporation
Canopy Growth is a world-leading diversified cannabis and hemp company, offering distinct brands and curated cannabis
varieties in dried, oil and Softgel capsule forms. From product and process innovation to market execution, Canopy Growth is
driven by a passion for leadership and a commitment to building a world-class cannabis company one product, site and country at a
time.
Canopy Growth has established partnerships with leading sector names including cannabis icon Snoop Dogg, breeding legends DNA
Genetics and Green House seeds, and Fortune 500 alcohol leader Constellation Brands, to name but a few. Canopy Growth operates
ten cannabis production sites with over 2.4 million square feet of production capacity, including over 500,000 square feet of
GMP-certified production space. Canopy Growth has operations in eight countries across five continents. The Company is proudly
dedicated to educating healthcare practitioners, conducting robust clinical research, and furthering the public's understanding
of cannabis, and through its partly owned subsidiary, Canopy Health Innovations, has devoted millions of dollars toward cutting
edge, commercializable research and IP development. Through partly owned subsidiary Canopy Rivers Corporation, Canopy Growth is
providing resources and investment to new market entrants and building a portfolio of stable investments in the sector. From our
historic public listing to our continued international expansion, pride in advancing shareholder value through leadership is
engrained in all we do at Canopy Growth. For more information visit www.canopygrowth.com
About Hiku Brands
Hiku is focused on building a portfolio of engaging cannabis brands, unsurpassed retail experiences and handcrafted cannabis
production. With a national retail footprint led by Tokyo Smoke, craft cannabis production through DOJA's ACMPR licensed grow,
Van der Pop's female-focused educational platforms, and Maïtri, our Quebec based cannabis brand featuring high quality handmade accessories, Hiku houses an industry-leading
portfolio that aims to set the bar for cannabis brands in Canada.
Hiku's wholly-owned subsidiary, DOJA Cannabis Ltd., is federally licensed to cultivate and sell cannabis pursuant to the
ACMPR, owning two production facilities in the heart of British Columbia's Okanagan Valley.
Hiku's subsidiary, TS Brandco Holdings Inc. ("Tokyo Smoke"), has been conditionally awarded one of four master retail licenses in
Manitoba. Hiku also operates a network of retail stores selling coffee, clothing and curated
accessories, across British Columbia, Alberta and Ontario.
Forward-Looking Statement
This news release contains "forward-looking statements" within the meaning of the United States Private Securities Litigation
Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation. Often, but
not always, forward-looking statements and information can be identified by the use of words such as "plans", "expects" or "does
not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such
words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or
be achieved. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of Canopy Growth, Hiku or their respective subsidiaries to be materially
different from any future results, performance or achievements expressed or implied by the forward-looking statements or
information contained in this news release. These forward-looking statements include, but are not limited to, statements relating
to our expectations with respect to: the timing and outcome of the Transaction; the anticipated benefits of the Transaction to
the parties and their respective security holders; impact of the Transaction and anticipated growth of the combined entity; and
the anticipated timing of the Meeting.
Risks, uncertainties and other factors involved with forward-looking information could cause actual events, results,
performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking
information, including assumptions as to the time required to prepare and mail security holder meeting materials; the ability of
the parties to receive, in a timely manner and on satisfactory terms, the necessary regulatory, court and shareholders approvals;
the ability of the parties to satisfy, in a timely manner, the other conditions to the closing of the Transaction; other
expectations and assumptions concerning the Transaction; and such risks contained in Canopy Growth's annual information form
dated June 28, 2018 and in Hiku's amended and restated management's discussion and analysis for the
three months ended March 31, 2018 and filed with Canadian securities regulators available on Canopy
Growth and Hiku's respective issuer profile on SEDAR at www.sedar.com. Readers are cautioned that the foregoing list of factors is not exhaustive.
In respect of the forward-looking statements and information concerning the anticipated benefits and completion of the
Transaction and the anticipated timing for completion of the Transaction, Canopy Growth and Hiku have provided such statements
and information in reliance on certain assumptions that they believe are reasonable at this time. Although Canopy Growth and Hiku
believe that the assumptions and factors used in preparing the forward-looking information or forward-looking statements in this
news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such
events will occur in the disclosed time frames or at all. The forward-looking information and forward-looking statements included
in this news release are made as of the date of this news release and Canopy Growth and Hiku do not undertake an obligation to
publicly update such forward-looking information or forward-looking information to reflect new information, subsequent events or
otherwise unless required by applicable securities laws.
There can be no assurance that the Transaction will occur, or that it will occur on the terms and conditions contemplated in
this news release. The Transaction could be modified, restructured or terminated. Actual results could differ materially from
those currently anticipated due to a number of factors and risks.
Completion of the Transaction is subject to a number of conditions, including but not limited to, TSX and NYSE approval. The
Transaction cannot close until the required shareholder, court and regulatory approval is obtained. There can be no assurance
that the Transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the
Meeting, any information released or received with respect to the Transaction may not be accurate or complete and should not be
relied upon.
SOURCE Hiku Brands Company Ltd.
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