Verano Holdings (CSE: VRNO) took center stage this morning in M&A drama, announcing that it would be walking from its previously agreed to acquisition of Goodness Growth Holdings (CSE: GDNS). Justification for the termination was related to reported breaches of the agreement.
“We believe the decision to terminate this arrangement agreement was in the best interest of Verano and our shareholders. As we work through the termination process, we expect to provide additional commentary,” commented Verano CEO George Archos.
The company claims that Goodness Growth had breached covenants and representations as set out within the merger agreements, while further claiming that as a result Goodness Growth owes Verano $14.875 million in termination fees – despite Verano terminating the deal – and a further $3.0 million in transaction expenses that are being demanded get reimbursed.
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Just thirty minutes later, Goodness Growth responded to the news with its own press release, indicating that Verano had no right to terminate the deal from a legal standpoint, and instead accused Verano of various material breaches of the arrangement. Goodness followed this up by stating that they would be immediately commencing legal proceedings against Verano.
The company then went a step further, highlighting that Verano claims several items that Goodness has failed to perform in relation to the arrangement. The termination notice is said to include:
- i) claims of breaches of representations made by Goodness
- ii) claimed failure of Goodness to give reasonable consideration to Verano’s comments on the draft proxy circular related to the transaction
- iii) refusal of the board to re-evaluate terms of the transaction, despite no material adverse changes had occurred
- iv) Goodness’ failure to reaffirm its recommendation to shareholders, despite the proxy not yet being mailed to shareholders
Goodness for its part claims that all of the allegations are false, and that it has complied with the merger agreement in all material aspects, leaving Verano with no grounds to terminate the deal. Furthermore, Goodness is alleging at the same time that Verano is simply unhappy with the price it agreed to pay, and that they are unhappy Goodness is unwilling to move on the agreed up consideration to be paid.
Additional details on the failed transaction are expected to be provided by Verano at its next earnings call, which is yet to be scheduled.
The company originally agreed to acquire Goodness Growth back in February, offering at the time to pay 0.22652 Verano shares for each share of Goodness Growth. At the time, the transaction valued Goodness at US$413.0 million, and would see Goodness shareholders hold 10.1% of Verano on a post transaction basis.
Verano Holdings last traded at $6.40 on the CSE.
Information for this briefing was found via Sedar 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.
