SNDL Secures Full Ownership of Nova Cannabis
Earlier today, SNDL Inc. (Nasdaq: SNDL) and Nova Cannabis Inc. (TSX: NOVC) announced an agreement where SNDL will acquire all the remaining issued and outstanding common shares of Nova, amounting to approximately 34.8% of Nova Shares, through a statutory plan of arrangement. The agreement is estimated to be around $40 million.
The original deal between SNDL and Nova was originally assembled to enhance performance in the Canadian cannabis market. SNDL’s CEO, Zach George, emphasized the importance of building a consumer-centric model at scale, supported by robust shared services, capital access, and a well-developed cannabis retail pipeline. The transaction is expected to bring several benefits:
1. Retail Expertise: Nova’s retail expertise will bolster SNDL’s cannabis retail portfolio by improving programming, data initiatives, staff training, and inventory management.
2. Synergies and Cost Rationalization: The consolidation is anticipated to generate savings by streamlining public company expenses and optimizing general administrative costs.
3. Access to Capital: SNDL’s strong balance sheet will provide continued support for Nova’s retail platform in the competitive cannabis landscape.
From a business perspective, the acquisition signifies SNDL’s commitment to long-term growth and market presence in the Canadian cannabis sector. The proposed transaction offers liquidity and certainty to minority shareholders while creating a lasting retail legacy amidst the evolving industry landscape.
Under the agreement terms, Nova’s shareholders will receive $1.75 in cash for each Nova Share, representing a premium of 41.2% to the 20-day VWAP of Nova Shares. Shareholders also have the option to receive SNDL Shares as part of the consideration, subject to proration and a maximum of 50% of the aggregate consideration being payable in SNDL Shares.
The Transaction, approved by both boards of directors, is scheduled to close by October 18, 2024. Following the completion, Nova Shares will be delisted from the TSX, and Nova will cease to be a reporting issuer in Canada.
The next step involves securing shareholder approval through a court-approved plan of arrangement, subject to the majority vote of Nova shareholders and regulatory approvals.
Takeaway: Nova’s board of directors has recommended that shareholders vote in favor of the transaction, signaling confidence in its benefits to be approved.
