Canopy Growth Pays Premium For Hiku Brands

Canopy Growth Corporation (CGC) is acquiring Hiku Brands Company Ltd.  (HIKU.CN) and paying a premium for the shares. Canopy is paying C$1.91 per share, which is a 33% premium based on the average price over a 20-day period. Hiku shareholders will receive 0.046 each of a Canopy Growth share.

Consequently, WeedMD has terminated its plans to merge with Hiku and will receive a $10 million termination fee. The companies had announced an “Arrangement Agreement” back in April. That deal was more a merger than an acquisition.

“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,” said Alan Gertner, Chief Executive Officer of Hiku. “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.”

Hiku has been building a stable of cannabis brands including retail outlet Tokyo Smoke which has been conditionally awarded one of four master retail licenses in Manitoba, Van der Pop’s female-focused educational platforms, and Maïtri, our Quebec based cannabis brand featuring high-quality handmade accessories. 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 equals brands. Canopy is built on brands. So we combined them,” said Bruce Linton, Chairman & CEO, Canopy Growth, in haiku.

Stock Performance

Hiku stock (DJACF) jumped over 1% on the OTC Markets and was lately trading $1.12, down from its 52-week high of $3.87, but above its year low of $0.20. Canopy Growth stock fell over 1% to lately trade at $28.75, down from its year high of $36.55. WeedMD was falling over 1% to lately trade at $1.56 on the OTC Markets.

Transaction Details

According to the company statement transaction highlights include:

• 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.