Canadian hashish producer SNDL and retail operator Nova Hashish are amending a beforehand introduced deal by which SNDL will switch shops to Nova and return shares to the retail firm for cancellation, amongst different issues.
SNDL, headquartered Calgary, Alberta, is almost all shareholder of Edmonton, Alberta-based Nova after SNDL acquired Nova’s earlier dad or mum firm Alcanna.
“General, the amended phrases purpose to extend the variety of retail shops SNDL will vend into Nova Hashish (by an extra six areas) whereas reconfiguring SNDL’s fairness possession in Nova,” Matt Bottomley, an analyst for Toronto-based Canaccord Genuity, wrote in a Tuesday analysis notice summarizing the amended deal.
The multifaceted deal between SNDL, previously often called Sundial Growers, and Nova was introduced in December 2022.
The association initially concerned SNDL transferring 26 hashish shops to Nova whereas retaining a management- and administrative-services cope with the retailer, changing a credit score facility and returning 14.3 million Nova shares to Nova for cancellation.
Additionally beneath the unique deal, SNDL would have minimize its possession of Nova to lower than 20% by way of a capital distribution of SNDL’s Nova shares to SNDL shareholders.
The phrases of the amended deal introduced late Monday embrace:
- Nova will now purchase a complete of 31 shops from SNDL, together with 12 in Alberta, 11 in Ontario, three in British Columbia, three in Saskatchewan and two in Manitoba.
- The variety of Nova shares to be returned by SNDL to Nova for cancellation might be considerably diminished to roughly 2 million.
- SNDL will enhance the variety of Nova shares being distributed within the capital distribution to SNDL shareholders in order that SNDL holds not more than 19.9% of Nova’s shares.
“Because of SNDL’s possession within the Nova Shares being diminished under 20%, Nova might be permitted to instantly personal and function hashish retail shops in Ontario and British Columbia, in accordance with relevant legal guidelines,” Nova famous in a information launch.
Different points of the amended deal embrace:
- Nova’s revolving credit score facility of 15 million Canadian {dollars} ($11.2 million) from SNDL “is to be eradicated by means of capital contribution by SNDL, which is anticipated to be totally drawn by Nova on the time of closing.” SNDL will lend Nova a brand new CA$15 million revolving credit score facility with a attainable CA$10 million accordion.
- SNDL will agree to not “demand reimbursement of, or take any motion referring to, any quantities drawn by Nova on the prevailing credit score facility between Nova and SNDL previous to June 30, 2023, besides in reference to circumstances” that might have “a fabric hostile impact” on Nova.
- SNDL will proceed to offer administration and administrative companies to Nova with a three-year price vacation, after which Nova pays SNDL CA$2 million yearly.
- SNDL will obtain the mental property associated to Nova’s Worth Buds low cost retail model.
- Licensing agreements will see Nova use SNDL’s retail banners (Worth Buds, Spiritleaf and Superette) in change for an annual price.
- Nova can even grant SNDL “sure nomination rights to the Nova board.”
The amended deal is topic to inventory change and shareholder approvals.
Shares of SNDL commerce on the Nasdaq; Nova trades as NOVC on the Toronto Inventory Change.
Nova mentioned it expects the deal to shut earlier than the tip of June.
Final week, Nova reported an annual web loss of CA$11.2 million, with enhancing income and product sales in comparison with the earlier yr.
On Monday, SNDL introduced it had been granted a administration cease-trade order “on account of an anticipated delay” in submitting its monetary statements for 2022.
