Aphria To Merge With US-Based SweetWater Brewing In US$300 Million Transaction

Aphria Inc (TSX: APHA) (NASDAQ: APHA) this evening announced that it has entered into an arrangement of what it calls merger and acquisition of SW Brewing Company, LLC, whom operates as SweetWater Brewing, in a transaction valued at US$300 million. The firm is said to be one of the largest independent craft brewers in the US based on volume.

SweetWater currently has distribution in 27 states plus the District of Colombia. The company, whom has a brewery located in Atlanta, Georgia, currently is said to distribute through roughly 29,000 retail locations. The company has a lineup of what is defined as a “lineup of year-round, seasonal and specialty beers, a portfolio of brands closely aligned with a cannabis lifestyle.”

The company is currently behind SweetWater 420 Extra Pale Ale and IPA, which are served in over 50 countries globally across six continents. The drinks use terpenes and natural hemp flavours to mimmick popular cannabis strains in their beer.

In terms of financials, the company is said to have generated net revenue of $66.6 million for the year ended December 31, 2019, along with adjusted EBITDA of $22.1 million, via the sale of 261,000 barrels of alcohol. On a pro-forma basis, the company expects to have a combined $650 million to $675 million run rate of net revenue on an annual basis, along with $65 million to $70 million of adjusted EBITDA. SweetWater is anticipated to account for 15% of net sales.

The justification for the transaction is that it will enable Aphria to position itself with infrastructure ahead of a potential federal legalization event. Although the acquisition does not involve cannabis assets, Aphria indicates that the arrangement will “create a larger and more diversified leading global cannabis company.”

Under the terms of the agreement, SweetWater is to become a wholly owned subsidiary of Aphria, with current unitholders of the company to receive $250 million in cash, and $50 million in Aphria stock. An additional $66 million earnout is available through to 2023. The transaction is to be funded through a $100 million term debt facility, up to $100 million from the current at-the-market program, and via cash on hand.

The transaction is anticipated to close by the end of December 2020.

Aphria Inc last traded at $6.52 on the TSX.

Information for this briefing was found via Sedar and Aphria Inc. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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