Aphria, Inc. (NYSE:APHA) has responded to a hostile takeover by Green Growth Brands Limited that was seeking to acquire Aphria’s outstanding common shares in a stock deal worth C$2.8 billion. Green Growth Brands was formed on February 14 and operations are limited with no tangible assets and almost no revenue. However, it has been listed, and its stock has seen an increase regardless pot stocks experiencing a decline. Since the shell started trading, the shares have appreciated by 66% with a C$890 market cap and a daily share volume of $1.3 million.
The plot to take over Aphria was engineered by key insiders and several parties that are related to Aphria. Green Growth Brands has been in operation for less than a year, and it was listed in the Canadian exchange barely two months ago.
The irregularity in the deal resulted from the fact that GGB has a market capitalization of $890 million at $4.98 for each share and yet they wanted to acquire APHA at a stock value of $7 per share. GGB bidding had inside backing at APHA with CEO Vic Neufeld being part of the advisory board at GA Opportunities that is associated with GGB. GGB’s board of directors had equally served previously on the board of APHA, or had business dealings with APHA.
Response to the proposal
Responding to the GGB proposal, APHA chair Irwin Simon said that considering the value the company had created and the growth prospects they have, the proposal did not meet their expectations, and it would not be rewarding to shareholders. He equally indicated that the proposition was risky since GGB had brokered financing at a cost that is double their share price average.
The proposal was said to undervalue APHA considering the significant market opportunities that are available and the name they have built for themselves in the cannabis market. The board of directors has nonetheless set up an independent committee of directors that will look at the proposal as well as any formal offers that may be received.