Why Green Growth Brands is not giving up on Aphria

Green Growth Brands is not giving up on their hostile takeover of Aphria, even though Aphria made it more than clear that they want nothing to do with them.

Aphria has been on a pretty bad streak in the past two months. First, they were shorted big time, then they fired their CEO and Chairman Vic Neufeld.

The co-founder of Aphria Cole Cacciavillani also left his position as the Vice President of Growing Operations. He was basically the man with the plan behind the whole low-cost growing idea.

Then, on top of everything that happened, they were notified of a hostile takeover attempt by the American company Green Growth Brands.

In mid-December, Green Growth Brands reached out to hurting Aphria shareholders and offered them what could only be seen as a handout at that point in time.

The initial setting

After the “big short” by Gabriel Greco wiped a huge chunk of Aphria’s value, the company officials failed to make a substantial rebuttal.

Compare that to the Cronos short, which happened just a month before the short attack on Aphria, and you might start to see why Aphria hasn’t recovered to its former value.

Aphria failed to release a proper rebuttal to Greco’s claims and created a committee of its board members to investigate the claims.

However, the board members on that committee are the same ones being investigated, so that didn’t bring any faith back to the shareholders.

Green Growth Brands saw the opportunity to benefit from this and went in for the kill.

The value of their Canadian subsidiary, Xanthic Biopharma, was at $5.16 USD per share around the time, and Green Growth Brands decided this valuation will help them acquire Aphria.

Their offer of 1.5714 Xanthic shares per Aphria share would have valued the Canadian company at about $8.10 per share, even though it was still around $5 USD at the time.

Green Growth Brands made its offer conditional on completing a financing deal that values its shares at $7 each. At that price, its offer would be worth $11 per Aphria share.

Aphria shareholders scoffed at this offer, as the APHA stock was right around that price in the months leading up to the short attack, and they didn’t believe GGB was really worth over $5 USD.

The CEO of Green Growth, Peter Horvath, said that their valuation came from a $300 million investment at a $7 USD per share price.

GGB presents their offer

Late in January, Green Growth Brands decided to present their all-stock takeover offer to the Aphria shareholders. The offer’s value stood at around $2.4 billion CAD.

Aphria rejected this bid, saying it undervalued the company which they believe was worth $2.6 billion, and offered no premium for the takeover as well.

However, Horvath says that he believes Aphria isn’t ready to give up on the Canadian market access and cultivation capabilities they could leverage in future deals.

“It’s likely there needs to be some negotiation and there’s a chance that the offer might change,” Horvath said.

The stock gap between Aphria and GGB is relatively big, and GGB will have to make up the difference by boosting their stock.

They plan on doing so by acquiring Desert Rose, a medical marijuana cultivator and retailer in Arizona, for $12.4 million USD.

If that acquisition goes as planned, GGB will have dispensaries in Arizona, Ohio, and Massachusetts. Adding Aphria to their portfolio of brands would make Green Growth Brands one of the biggest weed-only companies in North America.

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