It appears that Green Growth Brands (CSE: GGB) is nearing the end of its lifespan. The company announced this evening prior to releasing its second quarter financial results that they have received a definitive stalking-horse agreement for the sale of its CBD operations.
For those unaware, a stalking-horse bid is a process typically used within bankruptcy proceedings as firms see their assets sold off. Investopedia describes the arrangement as “an initial bid on the assets of a bankrupt company. The bankrupt company will choose an entity from a pool of bidders who will make the first bid on the firm’s remaining assets. The stalking horse sets the low-end bidding bar so that other bidders can not underbid the purchase price.”
The entity purchasing the CBD operations of Green Growth is that of The BRN Group, a firm founded by Adam Arviv and Sean Posner. The firm itself is being described as being founded by the “founders of Green Growth Brands“. Arviv, along with the Ohio-based Schottenstein family are the two founding parties behind that of Green Growth Brands. As a result, the transaction has been labelled as being a related party transaction. A Sean Posner is also listed as being the contact person for WMBGG Resources Ltd, whom previously had nomination rights for a director at Green Growth Brands. Its unclear if director Carli Posner is related.
Under the terms of the transaction, BRN Group will acquire 80% of Green Growth’s CBD operation, and in the process assume all of the assets and related liabilities of the operation. Green Growth is expected to retain a 20% interest in the operation based on the current terms. BRN will then enter into a strategic advisory and services agreement with that of Authentic Brands following the closing of the transaction.
The current arrangement has a 30-day “go shop” period in which Green Growth can entertain other potential agreements for the sale of the CBD business unit. However, should a different arrangement be entered into the firm will be required to pay a $750,000 termination fee to that of BRN Group.
In addition to the sale of its CBD operation, Green Growth has restructured currently outstanding debts. The firms outstanding US$23.7 million in debentures have seen the maturity date move from October 2020 to that of October 2024. In consideration of this, the conversion price of the debentures will be lowered from $2.45 to the lower of the A) the current share price of the equity at the time of the news release and B) the ten day moving average of the equity following today’s news release.
A private placement will also be taking place, to the tune of up to $30 million. All J’s Greenspace has committed to providing at least $10 million of the total financing.
Finally, the company has admitted that it is currently in a state of distress, closing off the news release by justifying the related party transaction due to “having determined that the Company is in serious financial difficulty with limited alternatives, that the Related Party Transactions are each designed to improve the Company’s financial position and that the terms of each Related Party Transaction are reasonable in the Company’s circumstances.”
Green Growth Brands last traded at $0.43 on the CSE.
Information for this briefing was found via The CSE and Green Growth Brands. 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.
