Aphria Stands Pat After Green Growth Launches Formal Takeover Bid

Green Growth Brands Inc GGBXF walked the talk by launching a hostile bid for cannabis producer Aphria Inc APHA, and the latter promptly retorted by advising its shareholders not to take any action on the offer.

As outlined in a Dec. 27 release, Green Growth filed its offer to purchase all issued and outstanding shares of Aphria and circular & related documents with the securities regulatory authorities both in Canada and the U.S.

What Happened

The hostile offer was formally launched Wednesday, and will remain open till 5 p.m. Toronto time May 9, Green Growth said. The offer calls for exchanging each of Aphria shares for 1.5714 shares of Green Growth. MarketWatch first reported on Green Growth's formal offer.

Green Growth said it has secured commitment from an investor to purchase up to $150 million worth its shares, as a backstop to its previously announced intention to complete a $300 million equity financing in connection to the offer.

"The all-stock deal would value Aphria at roughly C$2.8 billion, according to Green Growth’s math, which values its own shares higher than the market does," MarketWatch said.

Meanwhile, Aphria recommended shareholders not take any action on the offer until the company's board makes a formal recommendation.

The exchange ratio offered by Green Growth represented a 23 percent discount to the 20-day volume weighted average share price of Aphria before Green Growth made its intention public in late December.

Why It's Important

Aphria's shares came under selling pressure in early December following allegations by short sellers that it's a "shell game."

Notwithstanding the negative headlines that dented Aphria's shares, the company sees the offer as opportunistic that fails to reflect its substantial value and growth prospects.

What's Next

Áphria said its board would factor in many considerations before making its recommendation.

"[W]e look forward to providing our response to shareholders in due course. In the interim, shareholders should take no action as it relates to the GGB offer," the company said in a press release.

Aphria's stock traded down 5.5 percent at $6.69 in Wednesday's pre-market session. The stock rose 6 percent in Tuesday's trading session.

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