Shares of Aphria (APHA 6.24, +0.67) have climbed 12.0% in pre-market after Green Growth Brands made a hostile takeover bid for the Canadian cannabis grower.
Green Growth Brands owns a portfolio of companies that grow and sell cannabis and cannabis-based products. The company has conducted previous business with Aphria, but Green Growth Brands believes that Aphria could benefit from having an accomplished management team, which is something that Green Growth brings to the table. During his 35-year career in retail, Green Growth CEO Peter Horvath oversaw the IPO of shoe retailer DSW (DSW 24.89, +0.02) and has worked for other companies like Victoria's Secret, American Eagle, and Limited Brands.
Green Growth's offer would provide shareholders of Aphria with 1.5714 shares of Green Growth for each share of Aphria. The purchase price represents a 45.5% premium to Aphria's closing price on December 24. The offer, which values Aphria at $2.10 bln, implies a CAD7 price for Green Growth's shares, but the stock ended yesterday's session at CAD4.98.
Aphria's management indicated that it will review the proposal, but it believes that it significantly undervalues its company. Aphria noted that based on a 20-day volume weighed average price, the proposed exchange ratio is roughly 23.0% below Aphria's average share price during that stretch.
Aphria's management revealed that it received Green Growth's offer just a few hours before the offer was announced publicly. This leads Aphria to believe that Green Growth is trying to acquire Aphria through "a highly-conditional offer at a significant discount to its current and future value."