SNDL to acquire remaining stake in Nova Cannabis

SNDL Inc. (Nasdaq: SNDL) agreed to buy out minority shareholders of Nova Cannabis Inc. in a deal valued at approximately C$40 million, a move that will strengthen its position in Canada’s cannabis retail market.

The all-cash transaction, announced Tuesday, will see SNDL acquire the remaining 34.8% of Nova shares it doesn’t already own.

Under the terms of the deal, SNDL will pay C$1.75 per share for the outstanding Nova shares, representing a 41.2% premium to Nova’s 20-day volume-weighted average price. The transaction is expected to close by Oct. 18, subject to shareholder and regulatory approvals.

“Today’s announcement by our Alberta-based corporations underscores our commitment to sustainable performance in Canadian cannabis,” SNDL’s CEO Zach George said in a statement. He pointed to the company’s focus on “building a consumer-centric model at scale, supported by SNDL’s robust shared service model, access to capital, and a well-developed cannabis retail pipeline.”

In November 2023, SNDL and Nova terminated a planned merger but maintained close ties through an existing management and administrative services agreement. That earlier deal, announced in December 2022, had envisioned creating a “well-capitalized cannabis retail platform in Canada under a vertical integration model.”

SNDL said it expects the transaction to generate savings through streamlined public company expenses and optimized general and administrative costs. The company also touted its “robust balance sheet” as key to supporting Nova’s retail platform “in a competitive environment and challenging environment.”

Ron Hozjan, chair of Nova’s special committee, said the deal “offers liquidity and certainty to minority shareholders, while creating a lasting retail legacy in a nascent industry.”

Nova shareholders have the option to receive 0.58 SNDL shares for each Nova share instead of cash, subject to proration and a maximum of 50% of the aggregate consideration being payable in SNDL shares.

All of Nova’s directors and executives, along with Cannell Capital LLC, which controls about 13% of Nova’s shares, have agreed to vote in favor of the deal.

Upon completion, Nova’s shares will be delisted from the Toronto Stock Exchange, and the company will cease to be a reporting issuer in Canada.