Aphria rejects Green Growth’s offer
After urging shareholders to take no action on Green Growth Brands’ hostile takeover bid until the company’s board “made a formal recommendation to shareholders” last month, Aphria’s (APHA) board finally responded officially to Green Growth Brands on February 6. The company’s board unanimously rejected Green Growth’s offer for the following reasons:
- Discounted valuation: Aphria’s board believes that Green Growth’s offer undervalues the company by 23% at a time when cannabis industry acquisitions are taking place at a premium.
- Illicit activities: Aphria believes that Green Growth may be engaging in federally illegal activities, which could result in the combined companies being delisted on the TSX and the NYSE. While cannabis is illegal in the United States at the federal level, Aphria, Canopy Growth (WEED), Tilray (TLRY), and Aurora Cannabis (ACB) are engaging in legal activities in the jurisdictions in which they operate.
- Unproven company: Aphria stated that the company has “almost no operations” and lacks experience in the cannabis sector. It further added that the company’s lack of experience in the cannabis sector would bring no synergies for the combined company.
- Downside: Aphria’s board’s final reason for its rejection of Green Growth’s bid was the unusual trading activity that led to an increase in Green Growth’s formal offer. Aphria believes that investors could lose if Green Growth falls back to its historic trading level, which is lower than its current market price.
At the time of writing, Aphria was down nearly 9%, while Green Growth was down 7.2%. The Horizons Marijuana Life Sciences ETF (HMMJ) was down 5.4%.
For more on the latest in the cannabis industry, check out Cronos Group: GMP Securities Downgraded the Stock.