Evidently Sundial Growers, now referred to as SNDL Inc (NASDAQ: SNDL), really likes the business model of the Valens Company (TSX: VLNS). After taking a minority stake in the cannabis extractor last year, the firm has now agreed to acquire the company outright via an arrangement agreement.
The transaction will see Valens shareholders receive 0.3334 shares of SNDL for each share of Valens currently held, which equates to $1.26 per share as of Friday’s close. Total consideration as a result is pegged at $138 million, and amounts to a small 10% premium to the current 30 day volume weighted average price of the company.
Based on the closing price of Valens on Friday however, its an embarrassing $0.01 premium. Making matters worse, the company opened the market on Friday at $1.30 per share, after trading as high as $1.60 earlier in the week.
The transaction will enable SNDL to boast further vertical integration within the Canadian cannabis sector, given it currently operates 185 retail locations across the country, while also expanding its brand portfolio. Further, on a pro-forma basis, the company expects to have the highest Canadian cannabis revenue on an annualized basis.
The transaction is currently expected to amount to $10 million in annual cost synergies.
“We are thrilled to bring together two best-in-class cannabis companies that have extremely complementary assets to create a true market leader. Valens is one of the fastest growing branded cannabis companies in Canada with a focus on innovation and investing in low-cost automated manufacturing assets,” commented Valens CEO Tyler Robson.
The transaction as proposed is currently expected to close in January 2023, following a vote of approval from Valens shareholders, as well as customary regulatory approvals.
The Valens Company last traded at $1.25 on the TSX.
Information for this briefing was found via Edgar and the companies mentioned. 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.
