Zenabis Announces Exclusive Merger Discussions, Blasts Sundial For Issuing Notice Of Default

Zenabis Global (TSX: ZENA) this morning announced an update to its ongoing review of strategic alternatives, which was formally announced on December 21, 2020. The company has indicated that it is currently in exclusive discussions with “another significant licensed producer” for a potential merger discussion, while separately blasting Sundial Growers (NASDAQ: SNDL) in relation to a news release issued by the company earlier this morning.

As evidence of just how little involvement Zenabis had in Sundial acquiring its debt, the company this morning claimed that the debt acquisition by Sundial, “clearly demonstrate that Sundial made such investment in an attempt to coerce Zenabis into being acquired by Sundial.” The claim is based on actions of the company since acquiring the debt on December 30.

Zenabis was reportedly in discussions to extend the due date yet again of the obligation related to a $7.0 million principal payment due on December 31. However, the senior lender soon substituted a “soon to be consummated extension” with the demand instead that the repayment be made on time, while also demanding a forbearance agreement be signed. That agreement effectively demanded that the company enter into an exclusivity arrangement with the lender in relation to any sale of the company.

The result, is that Zenabis scrambled to arrange that previously announced $7.0 million cannabis purchase agreement with an unnamed licensed producer, in its wake leaving a rather unclear arrangement that might be used for an equity investment, or might be used for the purchase of cannabis.

The company also provided commentary on the notice of default issued, which reportedly is not for failure to make principal or interest payments but instead is “alleges a variety of defaults under the terms.” The company then goes on to claim the entire ordeal is, “an ill-disguised attempt to circumvent a fair and competitive process to acquire the Company by improperly foreclosing the equity of the Company or compelling Zenabis to enter into a transaction with Sundial.”

This commentary is then followed up with the announcement that the company has entered into an exclusive discussion with an unnamed licensed producer for a potential merger transaction. However no details are revealed by the company, and the company has indicated that no further details will be revealed until discussions progress.

Zenabis Global last traded at $0.065 on the TSX.

Information for this briefing was found via Sedar and Zenabis Global. 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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