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SNDL Inc. (NASDAQ:SNDL) ("SNDL" or the "Company") and Nova Cannabis Inc. (TSX:NOVC) ("Nova") are pleased to announce that they have entered into an agreement (the "Agreement" to implement a strategic partnership (the "Transaction") creating a well-capitalized cannabis retail platform in Canada under a vertical integration model with SNDL's upstream capabilities.
All financial information in this press release is reported in Canadian dollars unless otherwise indicated.
This news release constitutes a "designated news release" for the purposes of Nova's prospectus supplement dated July 22, 2022, to its short form base shelf prospectus dated June 27, 2022.
Transaction Summary
Pursuant to the Transaction, Nova will receive from SNDL:
As consideration, SNDL will receive:
In addition:
Key Transaction Highlights
"With this strategic partnership, Nova will be well positioned to thrive and focus on growth and profitability in the coming years through this world-class cannabis retail platform," said Zach George, Chief Executive Officer of SNDL. "SNDL will continue to support and sponsor Nova in a compliant manner while leveraging our capital base and retail M&A pipeline to improve Nova's trading liquidity and future growth."
"The Transaction provides Nova with a unique opportunity to further transform the cannabis retail market in Canada and enhance its business in a material way to the benefit of all our shareholders," said Anne Fitzgerald, lead independent director of Nova. "A special committee of independent directors of Nova has completed an extensive due diligence process including the advice of independent financial advisors and has concluded that the Transaction is fair from a financial point of view to Nova shareholders. The support of SNDL, both operationally and financially, allows Nova to remain laser-focused on growth and profitability."
Transaction Details
The implementation of the Transaction is subject to the satisfaction of a number of conditions, including, among other things, the approval of the Toronto Stock Exchange, and minority shareholder approval of the Transaction in accordance with Multilateral Instrument 61-101 – Protection of Minority Shareholders in Special Transactions ("MI 61-101"), as more particularly described below, and the receipt of applicable regulatory approvals, including those of the applicable provincial cannabis regulators. The Agreement provides for, among other things, customary support and non-solicitation covenants from Nova, including customary "fiduciary out" provisions that allow Nova to accept a superior proposal in certain circumstances and a five-business day "right to match period" in favour of SNDL. The Transaction is expected to be completed in May 2023.
All directors and executive officers of Nova have entered into voting support agreements with SNDL pursuant to which, among other things, the parties have agreed to vote their Nova Shares (if any) in favour of the Transaction.
Related Party Transaction
SNDL is considered a "related party" of Nova, and the Transaction constitutes a "related party transaction", as such terms are defined in MI 61-101. Nova is relying on an exemption from the formal valuation requirements of MI 61-101 in compliance with the financial hardship exemption.
Pursuant to MI 61-101, the Transaction is subject to the approval of a majority of the votes cast by the holders of Nova Shares represented in person or by proxy at a duly constituted meeting of the shareholders of Nova, excluding the votes attaching to the Nova Shares held by SNDL and its associates and affiliates (the "Minority Shareholder Approval"). Nova intends to obtain the Minority Shareholder Approval at an annual and special meeting of the Nova shareholders expected to be convened in May 2023 (the "Meeting"). Further particulars of the Transaction will be specified in the management information circular that will be sent to Nova shareholders in advance of the Meeting, and filed on the System for Electronic Document Analysis and Retrieval (SEDAR) under Nova's profile at www.sedar.com.
Nova Board Approval
Nova's board of directors has unanimously approved the Transaction after receiving the unanimous recommendation of a special committee of Nova's independent directors (the "Special Committee"). Nova's board of directors has unanimously resolved to recommend that the shareholders of Nova vote in favour of the Transaction.
Eight Capital has provided a fairness opinion to the Special Committee of Nova that, subject to the assumptions, limitations and qualifications set out in such fairness opinion, the consideration to be received by Nova pursuant to the Transaction is fair from a financial point of view to Nova.