Valens Shareholders will receive 0.3334 SNDL shares per Valens share, representing a premium of approximately 48% on the 10-day VWAP of the Valens shares on the TSX prior to the signing of a non-binding expression of interest related to the transaction
Shareholders are encouraged to vote well in advance of the proxy deadline of
Shareholders who have questions or need assistance in voting should contact
The SNDL Shares to be issued to Valens Shareholders represents an implied value of
The Valens board of directors (the "Valens Board"), after consultation with its financial and legal advisors, and after careful consideration of, among other factors, the unanimous recommendation of the Valens Special Committee ("the "Special Committee") and the receipt of the fairness opinion of
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1 Includes Nova Cannabis Inc. corporate stores and franchise stores. |
REASONS TO SUPPORT THE ARRANGEMENT
- Continued Growth. The Arrangement will provide Valens Shareholders with approximately 9.5% ownership of a large and rapidly growing diversified and vertically integrated business upon completion of the Arrangement, which includes significant production, branding, investment and retail businesses (including 171 liquor retail stores and 1851 cannabis retail stores). Valens business will be able to pursue future growth with access to the pro forma combined company's substantial unrestricted cash position of approximately
$314 million as ofAugust 19, 2022 (compared to Valens' current net debt position of$28 million ). In addition, the pro forma combined company will have the potential for significant growth through cross-penetration of Valens-branded products intoCanada's cannabis retail stores, including through ColdHaus' robust distribution sales network. Collectively, the Arrangement will allow the pro forma company to better navigate current industry and macroeconomic headwinds and sustainable competitive advantage for long-term growth. - Combined Revenues and Market Share. The Arrangement will create a combined entity that is expected to be a top licenced producer with top 10 market share in both overall cannabis and cannabis 2.0 (according to Hifyre, based on the month ending
July 2022 in AB, BC, ON, SK). Cannabis 2.0 products include: edibles, concentrates, vapes, beverages and topicals. In addition, the pro forma combined company is expected to be the highest revenue generating cannabis company in Canada (based on annualized revenue in the last fiscal quarter) currently trading well under its tangible book value. - Synergies and Cost Savings. The combination of SNDL with Valens is expected to deliver more than $10 million of annual cost synergies. Together with incremental revenues from greater distribution of Valens cannabis products, it is estimated that the completion of the Arrangement will deliver upwards of $15 million of additional EBITDA on an annual run-rate basis through synergies and other strategic initiatives.
- Prospects as an Independent Entity. The Valens Board assessed current industry, economic and market conditions and trends, and expectations of the future prospects in the cannabis industry, as well as information concerning the business, operations, assets, financial performance and condition, operating results and prospects of Valens, including the strategic direction of Valens as an independent entity and its future financial and liquidity requirements (particularly in light of a desire to avoid dilutive financings). The Valens Board also took into consideration the views expressed to it by the Valens Special Committee with respect to the strategic direction of Valens as an independent entity versus the opportunity to complete the Arrangement with SNDL.
- Significantly Enhanced Market Liquidity. The SNDL Shares have a high daily average trading volume. During the 30 days ended
August 19, 2022 , the average daily trading value of the SNDL Shares was approximatelyUS$103.8 million on Nasdaq versus approximatelyC$5.2 million andUS$0.3 million for Valens on the TSX and Nasdaq, respectively. - Implied Premium. The Exchange Ratio represents a 10% premium on a trailing 30-day VWAP, and a 21% premium on a trailing 60-day VWAP of the Valens Shares on the TSX up to
August 19, 2022 , the last trading day prior to the announcement of the transaction. In addition, the Exchange Ratio represents a 48% premium on a trailing 10-day VWAP of the Valens Shares on the TSX up toJune 27, 2022 , the last trading day prior to the entering into of a non-binding expression of interest with SNDL for the Arrangement. - Support of Directors and Executive Officers. All of the directors and executive officers of Valens who own
Valens Shares have entered into voting and support agreements with Valens pursuant to which they have agreed, among other things, to support the Arrangement and to vote theirValens Shares in favour of the Arrangement. - Fairness Opinion. The Valens Special Committee has received a fairness opinion from
Cormark Securities to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications set out therein, the consideration to be received by Valens Shareholders pursuant to the Arrangement is fair, from a financial point of view, to Valens Shareholders. For more information on the fairness opinion, shareholders should refer to the management information circular section entitled "The Arrangement – Fairness Opinion". - Tax-Deferred Transaction. The exchange of
Valens Shares for SNDL Shares pursuant to the Arrangement will generally occur on a tax-deferred basis for Canadian federal income tax purposes and is intended to qualify as a tax-deferred "reorganization" forUnited States federal income tax purposes. For a summary of certain Canadian federal income tax consequences of the Arrangement for Valens Shareholders who are subject to Canadian taxation, see the discussion under "Certain Canadian Federal Income Tax Considerations". For a summary of certainUnited States federal income tax consequences of the Arrangement for certain Valens Shareholders who are subject toUnited States taxation (including certainUnited States federal income tax consequences if the exchange ofValens Shares for SNDL Shares pursuant to the Arrangement were to fail to qualify as a tax-deferred "reorganization" forUnited States federal income tax purposes), see the discussion under "Certain United States Federal Income Tax Considerations". Such summaries are not intended to be legal or tax advice. Valens Shareholders should consult their own tax advisors as to the tax consequences of the Arrangement to them with respect to their particular circumstances.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN
The special meeting of Valens Shareholders will be held on
Registered Shareholders | Beneficial Shareholders | ||||
Valens Share held in own name and represented by a physical certificate or DRS and have a 15-digit control number. | |||||
Internet | www.investorvote.com | www.proxyvote.com | |||
Telephone | 1-866-732-8683 | Call the applicable number listed on the voting instruction form. | |||
Return the form of proxy in the enclosed postage paid envelope | Return the voting instruction form in the enclosed postage paid envelope. |
The close of business on
The deadline for Valens Shareholders to return their completed proxies or voting instruction forms is
SHAREHOLDER QUESTIONS AND VOTING ASSISTANCE
Valens Shareholders who have questions or need assistance in voting should contact
RECEIPT OF INTERIM COURT ORDER
The Company is also announcing that on
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Forward-Looking Statement Cautions:
This news release contains statements and information that, to the extent that they are not historical fact, may constitute "forward-looking information" or "forward-looking statements" within the meaning of applicable securities legislation ("forward-looking information"). Forward-looking information is typically, but not always, identified by the use of words such as "will", "expected", "projected", "to be" and similar words, including negatives thereof, or other similar expressions concerning matters that are not historical facts. Forward-looking information in this news release includes, but is not limited to, statements regarding: the completion of the Arrangement on the current terms thereof; the market value of the consideration to be received by Valens' shareholders; the combined company and its future business plans and growth going forward; the anticipated benefits associated with the Arrangement; the reasons to support the Arrangement; the market liquidity of SNDL Shares; the Meeting expected to take place on
Such forward-looking information is based on various assumptions and factors that may prove to be incorrect, including, but not limited to, factors and assumptions with respect to: the Arrangement being completed on the timelines and on the terms currently anticipated; all necessary shareholder, court and regulatory approvals being obtained on the timelines and in the manner currently anticipated; the anticipated benefits of the Arrangement; the business and operations of Valens, including that its business will continue to operate in a manner consistent with past practice and pursuant to certain industry and market conditions; the ability of Valens to successfully implement its strategic plans and initiatives and whether such strategic plans and initiatives will yield the expected benefits; and the receipt by Valens of necessary retail liquor and retail cannabis licences, approvals and authorizations (as applicable) from regulatory authorities, and the timing thereof.
Although Valens believes that the assumptions and factors on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Valens can give no assurance that it will prove to be correct or that any of the events anticipated by such forward-looking information will transpire or occur, or if any of them do so, what benefits Valens will derive therefrom. Actual results could differ materially from those currently anticipated due to a number of factors and risks including, but not limited to: the risk that the Arrangement is not completed as anticipated or at all, including the timing thereof, and if completed, that the benefits thereof will not be as anticipated; the risk that necessary shareholder, court or regulatory approvals are not obtained as anticipated or at all, and the timing thereof; the risk that the conditions to closing of the Arrangement are not satisfied or waived; risks associated with general economic conditions; adverse industry events; future legislative, tax and regulatory developments, including developments that may impact the closing of the Arrangement as anticipated or at all; conditions in the liquor and cannabis industries; the risk that Valens does not receive the necessary retail liquor or cannabis approvals and/or authorizations or that they are not able to open additional retail liquor or cannabis stores, directly or indirectly, as anticipated or at all; the ability of management to execute its business strategy, objectives and plans; the availability of capital to fund the build-out and opening of additional retail liquor or cannabis stores; and the impact of general economic conditions and the COVID-19 pandemic in
Additional information regarding risks and uncertainties relating to Valens' business are contained under the heading "Risk Factors" in Valens' annual information form for the financial year ended
Non-IFRS Financial Measures:
Valens reports its financial results and statements in accordance with the International Financial Reporting Standards ("IFRS"). This news release uses certain financial measures and/or ratios that are not based on IFRS ("non-IFRS"). Non-IFRS financial measures and non-IFRS ratios are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. These measures include, among others, "EBITDA". These non-IFRS measures are often accompanied by and reconciled with IFRS financial measures. For certain non-IFRS measures, there are no directly comparable amounts under IFRS. This document presents non-IFRS measures used by the Company when evaluating its results and measuring its performance.
Non-IFRS measures and industry specific metrics are used to provide investors with supplemental measures of Valens' operating performance and liquidity and thus highlight trends in Valens' business that may not otherwise be apparent when relying solely on IFRS measures and enable comparison with other companies in the cannabis industry. Valens' management also uses non-IFRS measures, non-IFRS ratios and supplementary financial measures, in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of executive compensation.
For relevant information about non-IFRS measures used in this document, see the "Non-GAAP Performance Measures and Ratios" section in the Company's management's discussion and analysis for the three and nine months ended
Third-Party Information:
This news release contains information that has been derived from publicly available sources that the Company believes to be reliable. While the Company believes that such information is reliable, the Company has not independently verified the information obtained from third party sources. Accordingly, no representation or warranty is made as to the accuracy, completeness or reliability of any third-party information and undue reliance should not be placed on any of the third-party information contained in this news release.
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