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Alcanna Spins-Out Cannabis Business, Combines With YSS To Form Nova Cannabis

January 19, 2021 10:07 am
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Alcanna Spins-Out Cannabis Business, Combines With YSS To Form Nova Cannabis

Alcohol and cannabis retailer Alcanna Inc. (TSX:CLIQ) (OTC:LQSIF) has agreed to spin-out its retail cannabis business into a separate company and merge it with YSS Corp. (TSXV:YSS) (WCN: A2PMAX) (OTC:YSSCF).

The all-stock deal is projected to occur around March 1.

Eight Capital and Cormark Securities Inc. will lead a minimum $25 million equity financing to complete the transaction.

Nova Cannabis

The combined company, which will do business as Nova Cannabis Inc., will have 53 retail stores across Ontario, Alberta and Saskatchewan.

About 80% of those stores will be re-branded as “Value Buds.” Nine other stores are currently being built.

Nova is expected to list on the Toronto Stock Exchange, and hold a value of $130 million.

Alcanna agreed to offer management and administrative services to Nova, as well as an operating line of credit of up to $10 million. Alcanna will also sell all securities of its subsidiaries, Alcanna Cannabis Stores GP Inc. and Alcanna Cannabis Stores Ltd. Partnership, to YSS in exchange of the issuance of 35.75 million YSS shares at a post-consolidation price of $3.00 per share.

Upon closing the transaction, but before the concurrent financing, YSS shareholders will hold around 17.5%, while Alcanna will hold the remaining 82.5% of the Nova Cannabis’ shares.

$25M Private Placement

Alcanna Cannabis Stores Limited Partnership via its subsidiary Alcanna Cannabis Stores Finance Ltd will finalize a brokered private placement of a minimum of 8.33 million subscription receipts of Alcanna Cannabis Stores Finance Ltd. with a price of $3.00 per receipt, for gross proceeds of minimum $25 million.

Simultaneously with the transaction Alcanna Cannabis Stores Finance Ltd and 2316416 Alberta Ltd., a subsidiary of YSS will combine under the agreement.

"Selling 'value bud' is what Value Buds will be all about. Our mission is to be disruptive; to provide consumers with the quality products they want at discount prices, which we believe will be lower than those offered by either the illicit market or current legal retailers," Darren Karasiuk, who is expected to lead New Nova as Chief Executive Officer and establish the Company's head office in the Greater Toronto Area stated. "

James Burns, Alcanna's vice chair and CEO, is expected to become chair of Nova.

"Alcanna's recent pilot project converting several Nova Cannabis stores to a discount banner was very successful with average sales increases of over 250%," Burns said. "We are confident of similar success as we convert most of our Alberta Nova stores to Value Buds over the next few weeks.”