Sundial Revises Consideration For Alcanna Acquisition Ahead Of Shareholder Meeting

Sundial Growers Inc. SNDL opted to improve the consideration to be provided to Alcanna Inc. CLIQ LQSIF shareholders for their common shares under a previously announced deal to acquire all issued and outstanding common shares of the liquor retailer for $346 million.

The move came ahead of the special meeting of Alcanna shareholders, which was earlier rescheduled for Friday, Jan.7.

The companies recently postponed the special meeting of Alcanna shareholders to consider and decide if it was advisable to move the special resolution to approve the proposed plan of arrangement with Sundial.

The meeting was initially scheduled for Tuesday, Dec. 14, however, only 56.29% of the Alcanna shareholders eligible to vote had voted by Dec. 10, which was the original deadline to vote by proxy.

Now Reddit's favorite cannabis company has agreed to revise the consideration and include a cash component.

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 the 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.

Initially, Alcanna's shareholders were entitled to receive 10.69 common shares of Sundial, for each Alcanna share held, representing a deemed value of approximately $8.37 per Alcanna share, as of Jan. 5.

In consultation with its legal and financial advisors, Alcanna's board of directors has unanimously approved the revised consideration and recommends that Alcanna shareholders vote "FOR" the transaction.

In addition, Sundial recently reiterated its commitment to the proposed plan of arrangement with Alcanna and announced ISS' support for the plan.

"Despite recent market volatility, we remain committed to our plan of arrangement with Alcanna," Sundial's CEO Zach George recently stated.

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.

It 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.

George earlier explained that the company intends to "position all of our retail exposure for profitability and strive to work with Canadian licensed producers in order to delight consumers with quality cannabis products.

"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," the Sundial CEO added.

LQSIF Price Action

Alcanna's shares traded 6.41% higher at $6.14 per share at the time of writing on Thursday morning.

SNDL Price Action

Sundial's shares traded 3.1209% lower at $0.5929 per share at the time of writing on Thursday morning.

Photo: Courtesy of Scott Graham on Unsplash