Sundial's Alcanna Acquisition Just Steps Away From Closing After Final Court Order Approval

Alcanna Inc. LQSIF CLIQ announced on Wednesday that the Court of Queen's Bench of Alberta has granted a final order approving the previously announced plan of arrangement with Sundial Growers Inc. SNDL.

What Happened

In October, Sundial reported that it was acquiring all issued and outstanding common shares of the liquor retailer.

While the transaction was unanimously approved by the boards of directors of both companies and expected to close by the end of 2021 or the first quarter of 2022, the deal still has not gotten the green light from Alcanna's shareholders.

In December, the companies agreed to postpone the special meeting of Alcanna shareholders to consider, and if deemed advisable, to pass the special resolution to approve the proposed plan of arrangement with Sundial to Friday, Jan. 7 from its initial date of Dec. 14. As of the original deadline to vote by proxy, Dec. 10, 2021, only 56.29% of Alcanna's eligible shareholders had voted.

After reiterating its commitment to the proposed plan of arrangement with Alcanna and announcing ISS' support for the plan, Reddit's favorite cannabis company decided to improve the consideration to be provided to Alcanna for their common shares under the transaction.

In January, Sundial revised the consideration to include a cash component.

The Transaction Details

Under the amended arrangement previously announced in October, Alcanna shareholders will receive 8.85 common shares of Sundial and $1.5 in cash consideration for each Alcanna share held.

Based on this exchange ratio, the amount of cash consideration and closing price of Sundial shares on Jan. 5 (converted to $CA), the revised consideration represents a deemed value of approximately $8.43 per Alcanna share. This value implies a roughly 15.3% premium from the closing price of Alcanna shares on the TSX as of Jan.5.

Completion of the arrangement remains subject to certain other customary closing conditions, including the receipt of certain regulatory approvals required under applicable provincial liquor and cannabis legislation.

What It Means For Sundial

The acquisition is expected to deliver more than $15 million of additional EBITDA on an annual run-rate basis through synergies and other strategic initiatives.

That includes Alcanna's longstanding liquor business with a trailing twelve months free cash flow of $16.4 million on a built-out retail platform, as well as enhanced exposure to investment in Nova Cannabis Inc, a publicly listed, pure-play cannabis retail operator in which Alcanna holds an approximately 63% equity interest.

Currently, Alcanna operates 171 locations predominantly in Alberta under its three retail brands, Wine and Beyond, Liquor Depot, and Ace Liquor.

Nova operates 62 stores across Alberta, Saskatchewan and Ontario, primarily under the Value Buds and Nova Cannabis banners.

"Alcanna's value-focused model in liquor retailing has created market stability, and we believe that the replication of this playbook in cannabis has strong potential to drive a similar result," Sundial's CEO Zach George recently said.

LQSIF Price Action

Alcanna's shares traded 2.15% lower at $5.91 per share at the time of writing on Tuesday morning.

SNDL Price Action

Sundial's shares traded 1.48% higher at $0.5546 per share at the time of writing on Tuesday morning.

Photo: Courtesy of Scott Graham on Unsplash