Aphria closes Nuuvera deal on overseas plan
Cannabis company Aphria Inc. closed its roughly $ 425- million deal to acquire Nuuvera Inc. on Friday, as the company’s international strategy continues to take shape. Shareholders of Torontobased Nuuvera, will receive $ 0.62 cash and 0.35 of an Aphria share for each Nuuvera share they hold. That equates to around $ 50 million in cash and $375 million in Aphria stock ( as of Friday’s closing price).
When the deal was announced in January, it was valued at more than $ 800 million. A sharp, sector-wide drop in cannabis stocks, however, combined with a lower cash offer from Aphria — it had originally offered $ 1 cash per Nuuvera share — nearly halved the deal’s value.
The acquisition caught the attention of observers, and not only because of its size. Unlike Broken Coast Cannabis Inc., an established medical cannabis company that Aphria acquired in February for around $ 217- million, Nuuvera has no experience producing cannabis and has posted virtually no revenue.
It was only i ncorporated in January 2017, and went public this January t hrough a reverse t akeover of a shell company, a mere t hree weeks before the offer from Aphria. What Nuuvera appears to have is a set of international relationships in countries like Italy, Israel and Germany, and a well- connected board of directors and management team hailing from the world of online gaming, tech and pharmaceuticals.
Notably, Nuuvera’s focus is outside of the U. S., from which Aphria has been backing away. In February, it began to sell its interest in U. S. cannabis player Liberty Health Sciences Inc., after the TMX Group said it would not permit TSX- listed cannabis companies to operate south of the border.
“The Canadian investor market likes to value cannabis stocks on a basis of funded capacity… ( but) this deal is very different from that, this is an opportunity in international markets that are developing,” Aphria CEO Vic Neufeld said on an ana- lyst call in February discussing the deal.
An Aphria spokesperson said no one was available for comment on Friday.
To a degree, Aphria is also buying back its own product in the deal. In August 2017, it agreed to supply Nuuvera with 17,000 kilograms of cannabis annually, as part of a complicated deal that saw Aphria invest $ 2 million in Nuuvera and agree to sell the company land in Leamington, Ont. It also agreed to help build and run Nuuvera’s greenhouses in return for a payment of $ 0.10 per gram sold from the facility.
In January, Aphria increased its supply promise to 77,000 kilograms a year.
“I know it’s the elephant in the room, but this brings the retail margin that Nuuvera was otherwise going to earn ... and brings it onto the Aphria income statement,” Neufeld said on the February call.
The closing of the Nuu- vera deal comes on the heels of several other international moves made by an entity tied to Aphria, Scythian Biosciences Corp..
Aphria owns 7.8 per cent of the company, which reports its main business as funding University of Miami research into cannabis and traumatic brain injuries. Neufeld sits on the company’s board, alongside George Scorsis, CEO of Liberty Health and Renah Persofsky, another Aphria board member.
On March 12, Scythian announced its intention to acquire Argentina- based pharmaceutical importer ABP SA. On Friday this week, it announced its plan to acquire Jamaican cannabis company Marigold Projects Jamaica Ltd..
On Wednesday, Aphria also announced that it “has signed an exclusive supply agreement with an Argentinian- based pharmaceutical import and distribution company,” though it did not name the company.