Medical marijuana plants seen at Aphria's Leamington greenhouses on February 19, 2016. (Photo by Ricardo Veneza)Medical marijuana plants seen at Aphria's Leamington greenhouses on February 19, 2016. (Photo by Ricardo Veneza)
Windsor

Aphria suggests hostile takeover bid a bad deal

Leamington cannabis producer Aphria has responded to a takeover bid by an Ohio-based beauty and wellness retailer with an accusation that Green Growth Brands' offer is a significant discount to its current value.

The release from Aphria confirms a Bloomberg Canada report that said Green Growth made an "unsolicited offer" to buy all the company's outstanding common shares in an all-stock transaction.

"GGB's management presented the offer to Aphria the morning of December 27, 2018, and immediately went public with its proposal, less than six hours later and after the market closed on the same day," the release said. "The board believes that GGB is attempting to acquire the company through a highly conditional offer at a significant discount to its current and future value."

Irwin Simon, who has taken over as chair of Aphria's board of directors from Vic Neufeld, suggested the offer is not a good deal for its shareholders. The company said the proposed bid would be approximately 23 per cent below the company's average share price.

"Their proposal falls short of rewarding our shareholders for participating in such a transaction. Further, the proposed offer is quite risky given GGB's condition to complete a brokered financing at a price that is more than double the recent average share price, a key term to the proposal," he continued. "The board has determined that the GGB proposal, as it currently stands, significantly undervalues the company."

Aphria has established an independent committee of directors to consider the proposal and any formal offer received.

Aphria said it controls a passive investment in Green Acre Capital Fund II, which may have invested in a number of up and coming cannabis companies including Green Growth Brand. It said the independent committee will not include directors with any relationship with Green Acre Capital Fund II or Green Growth Brand.

Just after the start of trading Friday morning, Aphria's stock was up $1.03 a share on the TSX. It started trading Friday morning at $7.57 CDN a share. Within one hour of the stock market opening, Aphria had traded 7.2 million shares. It typically trades 15.4 million in a day.

On the New York Stock Exchange, shares started at $6.33 USD a share.

Green Growth Brand is backed by the Schottenstein family, based in Columbus, Ohio. The family of billionaires is known for clothing retailer American Eagle Outfitters and DSW, a discount shoe chain. They are also behind the Schottenstein Center, which houses the basketball and men's hockey teams at Ohio State University.

In July 2017, Aphria partnered with the Schottenstein family to grow medical marijuana in Ohio under a new business called Liberty Health Science.

Last month, Hindenburg Research accused Aphria officials of diverting funds from shareholders and into their own pockets. It raised questions about the true value of the company's Latin American acquisitions.  At the time, Aphria called the report "a self-serving attempt to profit by manipulating Aphria's stock price."

- With files from Mark Brown.

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