Aphria Shareholders Await Competing Bids or Sweetened Green Growth Offer
(Bloomberg) -- Two Aphria Inc. shareholders said they won’t tender to an unsolicited takeover bid from Green Growth Brands Inc. yet, betting on a competing bid or a sweetened offer for the pot producer.
“We’re treating this as a wait-and-see situation,” said Greg Eckel, portfolio manager at Canadian General Investments Ltd., Aphria’s 10th-largest holder with 675,000 shares. “Does someone else come in and figure there’s an opportunity here for them? That might be more practical and also might offer good management skills and potential synergies.”
Green Growth is offering 1.5714 shares per Aphria share, which would value the cannabis company at about C$2.4 billion ($1.8 billion). Aphria advised its shareholders to take no action on the formal bid presented late Tuesday until its board has had time to review it. Aphria had previously said an initial offer made last month was too low.
Eckel, who first bought Aphria in late 2017 and doubled down in mid-2018, said he’s lost money on the stock but sees plenty of room for the shares to gain, whether Aphria is acquired or goes it alone. Aphria, based in Leamington, Ontario, fell 3 percent to C$9.15 at 12:15 p.m. in Toronto, and has dropped 57 percent in the last 12 months.
“It’s still a formidable company in and of itself,” Eckel said in a phone interview. “It’s been beaten up quite a bit, so on a relative positioning basis I would say that if indeed it can be cleaned up, there is room for recovery. That could be done on its own or with a partner.”
He questioned whether the smaller Green Growth is the ideal partner, calling the offer “opportunistic.” Green Growth has a market value of about C$337 million.
While a second, higher offer would be a positive outcome, an enhanced bid from Green Growth would be even better, said Greg Taylor, who manages the Purpose Marijuana Opportunities Fund and holds 200,000 shares of Aphria and 300,000 shares of Green Growth.
“If, say, a company like Tilray came in to buy this, that would be good for Aphria because you’d probably get a deal that’s more cash at a higher price,” Taylor said in a phone interview. “The better solution would be if Green Growth bumps a little bit, like may be another $1 or so, to make it a friendly deal.”
Tilray Inc. is the second-largest cannabis company by market value.
Columbus, Ohio-based Green Growth plans to complete a third-party equity financing of C$300 million at C$7 a share, well above the C$5.90 the shares were trading at Wednesday morning. All Js Greenspace LLC, Green Growth’s controlling shareholder, has agreed to purchase up to C$150 million shares as a backstop to the financing. Taylor said it will have to find more shareholders who think the stock is worth C$7 to get the deal done.
“The onus is on Green Growth to tell the story, show the synergies and try to figure out a way to get their price higher before it becomes even close to being feasible,” he said.
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