Aphria Receives $2.1B Hostile Takeover Bid From Green Growth Brands

Aphria Inc APHAshares tumbled Dec. 3 after short sellers called it out for being a "shell game," and since then, they have shed $582 million in market value. The stock is poised to see a reversal in fortunes following the launch of a hostile offer.

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What Happened

Xanthic Biopharma Inc GGBXF, which does business as Green Growth Brands confirmed speculation regarding its intention to make an offer for buying out all shares it does not already own in Aphria.

The all-stock offer values Aphria at C$2.8 billion, or $2.1 billion in U.S. dollars, as Green Growth seeks to provide Aphria shareholders with 1.5714 common shares of Green Growth for each of the share they hold in Aphria.

The valuation represented a 45 percent premium over Aphria's closing price on the Toronto Stock Exchange Dec. 24, and used a value of C$7 for Green Growth shares compared to the C$4.98 at which they closed Thursday.

"Together, we can unleash synergies between our teams, assets and geographies, forming a combined enterprise that will accelerate our collective growth strategies in Canada, the U. S. and overseas," said Peter Horvath, CEO of Green Growth.

Green Growth said that ahead of the hostile offer, it had engaged in a discussion with Aphria regarding a friendly business combination.

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Why It's Important

Green Growth said the proposed combination will create a North American player with operations in Canada and the U.S.

Aphria's supply agreements in place when combined with Green Growth's manufacturing and retail operations will position the combined company on track to capture significant future growth.

Green Growth has cultivation, manufacturing and retail assets in Nevada, and it was recently awarded licenses to operate seven retail cannabis dispensaries. It also plans to release consumer-focused cannabis products such as topicals and balms.

The company said it already has the support of shareholders owning 10 percent of Aphria's outstanding shares.

Friday morning, Aphria said the offer significantly undervalues the company.

"While we appreciate GGB's interest in the value we have created at Aphria and our significant growth prospects, their proposal falls short of rewarding our shareholders for participating in such a transaction," Aphria Chairman Irwin Simon said in a statement.

Aphria shares were trading higher by 12.5 percent to $6.26 in the pre-market session.

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