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SNDL completes acquisition of Nova Cannabis shares

Published 22/10/2024, 12:02 am
SNDL
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CALGARY, AB - SNDL Inc. (NASDAQ:SNDL) has finalized the acquisition of all the issued and outstanding common shares of Nova Cannabis Inc. (TSX:NOVC) that it did not previously own. This move, which represents approximately 34.8% of Nova shares, was approved by Nova shareholders and the Court of King's Bench of Alberta earlier in October.

Under the terms of the acquisition, Nova shareholders received $1.75 in cash for each share, a 41.2% premium over the 20-day volume-weighted average trading price prior to the announcement of the arrangement on August 12, 2024. Alternatively, shareholders could elect to receive 0.58 of an SNDL share for each Nova share, subject to proration, with a cap of 50% of the total consideration being paid in SNDL shares.

Zachary George, CEO of SNDL, stated that this acquisition marks a significant milestone for the company, streamlining its cannabis retail operations and reducing public company expenses. He highlighted SNDL's strong financial position and the transaction's structure, which was designed to encourage shareholders to opt for cash, thus minimizing share dilution.

The Nova shares are expected to be delisted from the TSX and OTC Markets, and Nova plans to cease being a reporting issuer in Canada. Following these steps, SNDL aims to amalgamate with Nova as per Alberta's Business Corporations Act.

As a result of the arrangement, SNDL has acquired 275,507 Nova shares in exchange for 159,792 SNDL shares, and has paid out $37,283,790.25 in cash for 21,305,023 Nova shares. The closing price of SNDL shares on NASDAQ was US$2.02 on October 18, 2024.

Furthermore, SNDL intends to appoint J. Carlo Cannell, a seasoned practitioner of special situations, to its board of directors in connection with the arrangement.

This transaction is based on a press release statement and involves legal and financial advisors, with McCarthy Tétrault LLP representing SNDL and Eight Capital and Bennett Jones LLP advising Nova.

SNDL, known for being one of Canada's largest vertically integrated cannabis companies, aims to continue expanding its retail platform. Nova, which has been acquired, operates a network of cannabis retail stores primarily under the "Value Buds" banner and aims to disrupt the retail market with high-quality cannabis products at competitive prices.

In other recent news, SNDL Inc. has been making strategic moves in the cannabis and liquor industry. The company announced the retirement of Taranvir Vander, President of its Liquor Division, and the appointment of Navroop Sandhawalia as Interim President. SNDL has also reported a series of acquisitions, including the $40 million acquisition of Nova Cannabis Inc. and a successful bid for Indiva Limited, a leading producer of cannabis edibles in Canada.

SNDL's first quarter of 2024 showed a positive financial shift with a 6% rise in cannabis retail net revenue to $71.3 million, and a 17% increase in the cannabis operations segment's net revenue to $22.4 million. To align with these developments, SNDL has announced a comprehensive restructuring plan aimed at reducing annual expenses by over $20 million.

In compliance with regulatory norms, SNDL has been diligent in filing several Form 6-Ks with the U.S. Securities and Exchange Commission detailing recent corporate and operational updates. Following a recent DEA decision to reschedule cannabis, SNDL, holding $189 million in unrestricted cash and no debt, anticipates improved credit profiles and cash flow for U.S. cannabis operators. The company aims to be among the top five licensed cannabis producers in Canada by 2024. These are the recent developments in SNDL Inc.'s operations.

InvestingPro Insights

As SNDL Inc. completes its acquisition of Nova Cannabis Inc., investors may find additional context from InvestingPro's data and tips particularly relevant.

According to InvestingPro data, SNDL's market capitalization stands at $535.45 million, reflecting its position in the cannabis industry. The company's revenue for the last twelve months as of Q2 2024 was $666.51 million, with a modest growth of 2.02% over the same period. This acquisition of Nova Cannabis is likely aimed at bolstering SNDL's market presence and potentially improving its financial metrics.

An InvestingPro Tip indicates that SNDL is "trading at a low revenue valuation multiple," which could be seen as advantageous in light of this acquisition. This valuation metric might suggest that the market has not fully priced in the potential synergies and growth opportunities that could arise from the Nova Cannabis deal.

Another relevant InvestingPro Tip notes that "analysts predict the company will be profitable this year." This projection aligns with CEO Zachary George's comments on streamlining operations and reducing expenses through the acquisition. The potential for profitability could be a significant factor for investors considering SNDL's future prospects.

It's worth noting that InvestingPro offers 5 additional tips for SNDL, providing a more comprehensive analysis for those interested in delving deeper into the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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