- Transaction strengthens Choom’s leadership position in Canadian
cannabis retail
- Choom poised for accelerated growth with omni-channel retail
growth strategy
- Strategically timed to benefit from the continued Ontario
retail rollout
- Compelling value-creation opportunity with defensible store
portfolio in flagship locations
- Enhanced capital markets presence and balance sheet strength to
fuel growth in 2020 and beyond
- Combines the strength of Choom and Phivida’s executive teams,
national relationships and strategic shareholders with capabilities
across retail, branding and digital analytics
Choom Holdings Inc. (“Choom”) (CSE: CHOO; OTCQB: CHOOF)
and Phivida Holdings Inc. (“Phivida”) (CSE: VIDA) are
pleased to announce that they have entered into a definitive
arrangement agreement dated June 2, 2020 (the “Arrangement
Agreement”) pursuant to which Choom will acquire all of the
issued and outstanding common shares of Phivida (the “Phivida
Shares”) in exchange for common shares of Choom (the “Choom
Shares”) in an arm’s length all-share transaction valued at
approximately $7.3 million (the “Transaction”).
Under the terms of the Arrangement Agreement, Phivida
shareholders will receive 0.72566 of a Choom Share in exchange for
each Phivida Share held (the “Exchange Ratio”) based on
$0.082 per Phivida Share, representing a 10% premium to the 20-day
volume weighted average price of the Phivida Shares ending June 2,
2020, and based on a 20-day volume weighted average price of the
Choom Shares for the same period, being $0.113 per Choom Share.
Based on the closing price of the Phivida Shares on June 2, 2020,
the Transaction results in an implied premium of approximately 20%
per Phivida Share.
Upon completion of the Transaction, existing Choom and Phivida
shareholders will hold approximately 78% and 22% of the pro forma
company, respectively, on a fully diluted basis.
“The acquisition of Phivida will further Choom’s ability to
deliver on our business plans and accelerate our growth
initiatives, enabling our omni-channel strategy through enhanced
digital capabilities, and an expanded brick-and-mortar presence
across Canada,” said Corey Gillon, CEO of Choom. “The timing is
ideal as we prepare to expand our retail footprint in Ontario,
Canada’s largest market for cannabis sales, later this year, with
several flagship locations already secured.”
David Moon CEO of Phivida, added: “Following an extensive
evaluation of the Canadian cannabis market, we’re thrilled to
partner with Choom and continue to execute on our digital growth
strategy which will be complimentary to Choom’s brick and mortar
retail store growth. By leveraging consumer data collected through
our online websites and working with the Choom team to enhance in
store analytics, we are well positioned to optimize our business
for continued success.”
Strategic RationaleThe Transaction is expected to enhance
Choom’s strategy in becoming one of the dominant national retail
players in the Canadian cannabis retail sector. More specifically,
the Transaction is expected to:
Enhance Choom’s Leadership Position in Cannabis Retail:
Leveraging Choom’s current brick and mortar retail presence with
Phivida’s digital assets and branded product expertise, the
combined company will benefit from a vertically integrated strategy
focused on cannabis retail and consumer experiences.Accelerate
National Store-Roll out Program: Upon completion of the
Transaction, Choom will leverage Phivida’s current assets, to
accelerate the build-out of additional stores in Ontario and
British Colombia. The combined company will further benefit from
its deep relationships with prominent landlords to support future
store growth at marquee locations.Strengthen Choom’s Digital
Strategy & Analytics: Choom will leverage Phivida’s digital
assets and capabilities to enhance growth and consumer experiences
in its retail stores by utilizing Phivida’s strong e‑commerce
solutions and content-rich marketing platforms.Enhance Scale and
Access to Capital: The combined company will benefit from
enhanced capital markets presence and a broader shareholder group
with strengthened access to growth capital.Bolster Management
Team with Added Capabilities and Broader Stakeholders: The
combined company will have blue-chip retail and branded product
capabilities, digital and online expertise, countrywide
geographical representation, and an aligned entrepreneurial spirit
committed to creating one of the dominant national cannabis
retailers in Canada.
Transaction SummaryThe Transaction will be effected by
way of a court-approved plan of arrangement completed under
the Business Corporations Act (British Columbia) and will
require approval by at least 66 2/3% of the votes cast by the
shareholders of Phivida at a special meeting of Phivida
shareholders. In addition to shareholder approval, the Transaction
is subject to applicable regulatory, court and stock exchange
approvals and certain other closing conditions customary in
transactions of this nature.
The Arrangement Agreement has been unanimously approved by the
boards of directors of Choom and Phivida, and the Phivida board has
recommended that Phivida shareholders vote in favour of the
Transaction. A management information circular will be mailed
to Phivida shareholders in connection with a meeting of Phivida
shareholders to consider and approve the Transaction. The board of
directors of Phivida has obtained a fairness opinion from Haywood
Securities Inc. that, as of the date of the opinion, and subject to
the assumptions, limitations, and qualifications on which such
opinion is based, the consideration to be received by Phivida's
shareholders pursuant to the Arrangement Agreement is fair, from a
financial point of view, to the Phivida shareholders.
Directors and officers of Phivida as well as certain Phivida
shareholders holding, in aggregate, approximately 31% of the issued
and outstanding common shares of Phivida, have entered into support
and voting agreements pursuant to which they have agreed to vote
their Phivida Shares in favour of the Transaction.
The Arrangement Agreement includes customary provisions
including reciprocal non-solicitation provisions, subject to the
right of each of Choom and Phivida to accept a superior proposal in
certain circumstances, with both Choom and Phivida having a seven
business day right to match any such superior proposal for the
other party. The Arrangement Agreement also provides for reciprocal
termination fees of $500,000 if the Transaction is terminated in
certain specified circumstances, as well as a reciprocal payment of
a $250,000 expense reimbursement fee if the Transaction is
terminated in certain other specified circumstances.
Upon completion of the Transaction, Choom’s board of directors
will be reconstituted to comprise three directors nominated by
Choom and one director nominated by Phivida. A fifth director,
mutually agreed upon by Phivida and Choom, will subsequently be
added to the board.
None of the securities to be issued pursuant to the Arrangement
Agreement have been or will be registered under the United States
Securities Act of 1933, as amended (the "U.S. Securities
Act"), or any state securities laws, and any securities issued
in the Arrangement are anticipated to be issued in reliance upon
the exemption from such registration requirements provided by
Section 3(a)(10) of the U.S. Securities Act and applicable
exemptions under state securities laws. This news release does not
constitute an offer to sell or the solicitation of an offer to buy
any securities.
Advisors and CounselBDO Transaction Advisory Services
Inc. is acting as the exclusive financial advisor to Choom. Pushor
Mitchell LLP is acting as legal counsel to Choom.
Hillcrest Merchant Partners Inc. is acting as the exclusive
financial advisor to Phivida. Phivida received an independent
fairness opinion from Haywood Securities Inc. Gowling WLG (Canada)
LLP is acting as legal counsel to Phivida.
About Choom
Choom is a fast-expanding retail cannabis company who has
established one of the largest store networks in Canada. The Choom
brand is inspired by Hawaii's "Choom Gang" - a group of buddies in
Honolulu during the 1970's who loved to smoke weed - or as the
locals called it, "Choom". Evoking the spirit of the original Choom
Gang, our brand caters to the Canadian market with the ethos of
'cultivating good times'. Choom is focused on delivering an
elevated customer experience through our curated retail
environments, offering a diversity of brands for Canadians across a
national retail network. For more information, visit
www.choom.ca.
About Phivida
Phivida Holdings Inc. is a CBD-centric holding group with assets
in technology, publishing and consumer-packaged goods (CPG).
Headquartered in Vancouver BC, with operations in San Diego,
Toronto and Belgrade, Phivida produces a line of CBD-infused foods
and beverages (OKI), and CBD topicals and supplements (VIDA+), in
addition to managing and operating two CBD-related, online retail
marketplaces under the brand names Bloomgroove and Wikala.
Greencamp is Phivida’s online publication and knowledge center on
CBD sector news. For more information, visit www.phivida.com.
Cautionary Note Regarding Forward-Looking
Information
This news release contains “forward-looking information” within
the meaning of applicable Canadian securities legislation. Often,
but not always, forward-looking information can be identified by
the use of words such as “plans”, “expects” or “does not expect”,
“is expected”, “estimates”, “intends”, “anticipates” or “does not
anticipate”, or “believes”, or variations of such words and phrases
or state that certain actions, events or results “may”, “could”,
“would”, “might” or “will” be taken, occur or be achieved.
Forward-looking statements or information involve known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Choom, Phivida or their
respective subsidiaries to be materially different from any future
results, performance or achievements expressed or implied by the
forward-looking information contained in this news release.
Statements containing forward-looking information include, but are
not limited to, statements relating to our expectations with
respect to: the timing and outcome of the Transaction; the
anticipated benefits of the Transaction to the parties and their
respective securityholders; and the impact of the Transaction on
the parties’ respective businesses on a combined basis, and the
anticipated growth of the combined company and how the Transaction
are expected to enhance the parties’ respective future business
plans.
In respect of the forward-looking information in this news
release concerning the anticipated benefits and completion of the
Transaction and the anticipated timing for completion of the
Transaction, Choom and Phivida have provided such statements and
information in reliance on certain assumptions that they believe
are reasonable at this time, including assumptions as to the time
required to prepare and mail security holder meeting materials; the
ability of the parties to receive, in a timely manner and on
satisfactory terms, the necessary regulatory, court and shareholder
approvals; the ability of the parties to satisfy, in a timely
manner, the other conditions to the closing of the Transaction;
other expectations and assumptions concerning the Transaction.
Although Choom and Phivida believe that the assumptions and factors
used in preparing the forward-looking information or
forward-looking statements in this news release are reasonable,
undue reliance should not be placed on such information and no
assurance can be given that such events will occur in the disclosed
time frames or at all.
Risks, uncertainties and other factors involved with
forward-looking information could cause actual events, results,
performance, prospects and opportunities to differ materially from
those expressed or implied by such forward-looking information,
including; risks that the Arrangement will not close as anticipated
or at all, risks that required shareholder, regulatory or other
approvals will not be obtained or may be materially delayed, risks
that the synergies expected as a result of the Transaction will not
be realized as anticipated or at all, integration risks following
completion of the Transaction, risks associated with general
economic conditions, including adverse conditions resulting from
the ongoing COVID-19 pandemic and the resulting government policies
restricting mobility, assembly or contact with actual and potential
customers and suppliers; future legislative and regulatory
developments; inability to access sufficient capital on favourable
terms or at all, and such other risks identified in Choom’s and
Phivida’s most recent management’s discussions and analysis filed
with Canadian securities regulators and which are available on
Choom’s and Phivida’s respective issuer profile on SEDAR at
www.sedar.com. Readers are cautioned that the foregoing list of
factors is not exhaustive.
The forward-looking statements included in this news release are
made as of the date of this news release and Choom and Phivida do
not undertake an obligation to publicly update such forward-looking
information or forward-looking information to reflect new
information, subsequent events or otherwise unless required by
applicable securities laws. There can be no assurance that the
Transaction will occur, or that it will occur on the terms and
conditions contemplated in this news release. The Transaction could
be modified, restructured or terminated. Actual results could
differ materially from those currently anticipated due to a number
of factors and risks. Completion of the Transaction is subject to a
number of conditions, including but not limited to the approval of
the Canadian Securities Exchange and the approval of shareholders
of Phivida. The Transaction cannot close until the required
shareholder, court and regulatory approval is obtained.
There can be no assurance that the Transaction will be completed
as proposed or at all. Investors are cautioned that, except as
disclosed in the management information circular to be prepared in
connection with a meeting of Phivida shareholders to consider the
Transaction, any information released or received with respect to
the Transaction may not be accurate or complete and should not be
relied upon. The Canadian Securities Exchange has in no way passed
upon the merits of the Transaction, and has neither approved nor
disapproved the contents of this news release.
Contacts:
Choom – Corey Gillon, CEO, Telephone: 1 (604) 683-2509, Email investors@choom.ca.
Phivida – David Moon, Interim CEO, Telephone: 1 (844) 744-6646 x2, Email IR@Phivida.com.
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