The board of cannabis producer Aphria Inc. has rejected a hostile takeover bid by Green Growth Brands. Inc. saying it “significantly undervalues” the company and would have “negative repercussions.”
Shares of the Leamington, Ont.-based pot cultivator slipped by more than eight per cent in early trading on the Toronto Stock Exchange to $12.86.
Aphria’s board unanimously recommended the rejection after a committee reviewed the unsolicited offer, it said Wednesday.
The all-stock offer of 1.5714 shares of GGB for each Aphria share is “inadequate” and not in the interest of shareholders, the company’s independent board chairman Irwin Simon said.
“Regardless of their brazen attempts to suggest otherwise, GGB is asking Aphria shareholders to accept a substantial discount on their shares, as well as delisting from both the TSX and NYSE, resulting in a vast dilution of their ownership in Aphria,” he said in a statement.
Late last month, Aphria said an independent committee of directors would review the bid and its shareholders should wait until the board made a formal recommendation.
The official offer came after GGB said late last year that it planned to make an all-stock offer of 1.5714 GGB shares for each Aphria share.
GGB’s takeover attempts came after Aphria faced allegations in December by short-sellers questioning the company’s acquisitions in Colombia, Argentina and Jamaica. The cannabis company’s shares plunged in the wake of the report by Quintessential Capital Management and Hindenburg Research. Aphria has denied the report, but established a special committee of independent directors to review the deals in question.
Aphria’s board had previously said the unsolicited proposal “significantly undervalued” the company.
GGB’s formal offer is due to expire on May 9.
On Wednesday, Simon said Aphria is in a “better position than ever to create long-term value for our shareholders, following a positive second quarter and continued progress expanding our production capacity and global footprint.”
GGB, however, is offering shares in an illiquid company with limited operating history, minimal assets and no track record in the cannabis industry, he said.
“GGB clearly timed their offer to exploit recent lows for Aphria and cannabis stocks overall, with the goal of transferring value to the insiders who control GGB at the expense of Aphria shareholders,” he said.
Companies in this story: (TSX:APHA)
Armina Ligaya, The Canadian Press