Aphria Inc takeover

Aphria Inc Takeover (NYSE:APHA): Expect A Bidding War

After the close of trading on Wednesday, December 27th, Green Growth Brands Ltd (CSE:GGB) made a US$ 2.1 billion offer for Aphria Inc (NYSE:APHA), or around C$11 per share. We told our readers last week that a takeover bid was likely, although we didn’t see one coming from Green Growth. We said:

“the possibility that Canopy, Aurora or Tilray will acquire Aphria. In our opinion, Tilray makes the most sense because they need to justify their sky-high valuation. Aphria has more revenues than Tilray and brings an established LP into the Tilray fold.”

We believe the offer from Green Growth is just a starting point and that a bidding war is going to commence. Here’s our thesis:

  1. Green Growth has the financial backing of the billionaire Schottenstein family, which has a sprawling retail empire that includes lots of real estate and interests in grocery stores and consumer-goods manufacturing. They have the financial strength to increase their bid if they have to.
  2. Canopy, Aurora, and Tilray are not going to let the price go cheap.
  3. Aphria just appointed Irwin Simon as Chairman. He founded The Hain Celestial Group, Inc. a leading organic and natural products company, in 1993.  As Founder, President, Chief Executive Officer, and Chairman, Mr. Simon lead Hain Celestial for 25 years, growing the business to approximately US$3.0 billion in net sales including operations in North America, Europe, Asia, and the Middle East. Billionaire Carl Icahn made $430 million investing in Hain. Simon knows how to increase shareholder value and we expect him to drive a hard bargain in any negotiations.
  4. We believe a true offer needs to be above the 52-week high of $19.86 a share.

APHA Daily Chart

According to the Green Growth press release:

Prior to announcing its intention to take the Offer directly to shareholders, Green Growth engaged Aphria’s board to attempt to negotiate a friendly business combination that included, among other things, a very short exclusivity period to allow both parties to seriously consider the combination; a full go-shop provision in favor of Aphria; and the preservation of Aphria’s management and commitment to board representation at the combined company.  Aphria’s shareholders should be aware that Green Growth offered that upon a friendly business combination with support from Aphria’s board, Green Growth would invest C$50 million in equity at an Aphria per share value of C$11.00.

This tells us CEO Vic Neufeld and the board knew this offer was coming. That’s why they went out and go Irwin Simon to become Chairman. They want a seasoned executive at the top to negotiate a deal of this scale. After the recent findings from short sellers, we believe this is in every shareholder’s best interest.

Bottom Line

Aphria was bidding up 19.4% in after-hours trading. If a deal were to happen, it will be at a much higher price than C$11. All we can say right now is to hold on and let the bidding war commence. The next few days/weeks shall be interesting. Grab your popcorn!

We will be updating our subscribers as soon as we know more. For the latest updates on APHA, sign up below!

Disclosure: We own shares of APHA. We have not been compensated for this article.

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Aphria Inc Takeover (NYSE:APHA): Expect A Bidding War
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