Aphria Falls After Rejecting Green Growth's Hostile Takeover Offer

Canada-based cannabis company Aphria Inc APHA said Wednesday Green Growth Brands Inc GGBXF's hostile takeover offer significantly undervalues its stock and is inadequate.

What Happened

Green Growth presented an unsolicited takeover offer in which U.S.-based Green Growth will offer 1.5714 of its shares for each Aphria share. Aphria confirmed it's rejecting the offer for four reasons:

1. The hostile bid implies a 23-percent discount based on the 20-day volume weighted average price of Green Growth's stock immediately before the acquisition offer.
2. Accepting the deal would result in Aphria's stock being delisted from the Toronto Stock Exchange and New York Stock Exchange, which would potentially reduce interest from future strategic partnerships.
3. Aphria investors will receive as compensation shares of an illiquid company with limited operations and expertise in the cannabis sector.
4. The proposal doesn't account for Aphria's "bright outlook" and potential for "substantial value creation."

What's Next

Aphria boasts several near-term opportunities and catalysts that could create value for investors and result in the company becoming profitable, according to Irwin D. Simon, Aphria's independent Board Chair. The company can expand production and automation to generate scale advantages, target the global medical market, seek out acquisitions to gain more market share in the Canadian recreational market and develop new products fro the health and wellness sector.

"A hostile takeover by GGB ignores this bright outlook, which is another reason why the Aphria Board strongly urges shareholders to reject the bid," the executive said.

Aphria traded down 6.6 percent to $10 per share Wednesday morning. The stock traded under $7 per share as recently as Jan. 24.

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