Cannabis company Aphria says hostile bid undervalues its stock
TORONTO — Aphria Inc. shares shot up as much as 14 per cent early Friday before giving up some of their initial gains as investors responded to an American company’s takeover proposal that valued the Ontario-based cannabis company at $2.8 billion. Aphria shares were off their early highs at $8.46 after 30 minutes of trading at the Toronto Stock Exchange, up 89 cents from Thursday’s close at $7.57. Ohio-based Xanthic Biopharma Inc., which does business as Green Growth Brands, announced after Thursday’s close that its offer valued Xanthic shares at $7 each and Aphria shares at $11 per share. Aphria said Friday the actual value of Xanthic shares is substantially lower than the announced offer price and, at current market rates, undervalues the Leamington-based cannabis producer. In early trading Friday, Xanthic shares fell seven per cent to $4.60, down 38 cents, at the Canadian Securities Exchange. At that price, its offer of 1.5714 Xanthic shares would value Aphria shares at about $7.23. The newly installed chair of Aphria’s board said Friday that “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 of their share price, as a key term to the proposal,” said Irwin Simon. Simon was named chair of the Aphria board after Green Growth Brands announced its offer Thursday afternoon. Vic Neufeld, who had been chair, will remain Aphria’s chief executive officer and a director on Aphria’s board. Shares of most publicly-traded cannabis companies have been volatile over the last few months, including those of Aphria Inc. after its planned acquisition of LATAM Holdings Inc. came under fire in early December. Takeover offers that are made directly to shareholders without approval of the target company’s board of directors are considered to be hostile bids but Green Growth CEO Peter Horvath said Friday his company would prefer a friendly deal because the proposal hinges on the expertise each company brings to the table. “Aphria brings proven cultivation experience and, from what we’ve seen, they’re bringing that in a highly sophisticated and technological way to cannabis,” Horvath said. He listed his team’s accomplishments as the Victoria’s Secret lingerie brand, Bath & Body Works personal care shops, American Eagle denim specialty stores and DSW, a shoe retailing company. “So not only are we experienced in dealing with consumers but we’ve been leading winning teams consistently over the last few decades.” Horvath said he thinks a combination of the two companies would be a win for both sides and “we hope the board ultimately sees it that way as well.” “We’re happy to have further discussion with them to find the best way forward,” Horvath added. Aphria said it has established an independent committee of directors to consider any formal offers it receives. In the meantime, Aphria said it would continue to execute its current corporate strategy. Earlier this month, a Toronto law firm said it filed a proposed class action against Aphria and its chief executive and financial officers after the company was targeted by short-sellers. Koskie Minsky LLP alleges Aphria made false and misleading statements related to its acquisition of LATAM Holdings, a claim that has not been tested in court. The proposed class action came after short-sellers Quintessential Capital Management and Hindenburg Research alleged in early December that LATAM’s assets in Colombia, Argentina and Jamaica were “largely worthless.” Aphria said on Dec. 6 that it had set up a special committee of independent directors to review the LATAM acquisition.