What happened
Canadian cannabis company Sundial Growers (SNDL 3.00%) has been on an acquisition spree as it works to grow its business and execute a new business strategy. Investors reacted today to a statement from Sundial on one acquisition that was announced in early October. Shares jumped as much as 6.7% today, but pared about half of those gains, closing the session up 3.15%.
So what
Sundial has restructured its business using a two-pronged approach. The cannabis cultivation and production segment is expanding through acquisition, and it now also has an investment arm. One of the operating-business acquisitions was announced as an all-stock transaction two months ago when Sundial shares were trading higher.
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With a double-digit decrease in Sundial shares, shareholders of alcohol and cannabis retailer Alcanna would receive a lower value for their shares. But Sundial today reaffirmed its plans to complete the acquisition, and said independent proxy advisory firm Institutional Shareholder Services (ISS) is also recommending Alcanna shareholders approve the deal.
Now what
Although the value for Alcanna shareholders dropped from 9.12 Canadian dollars to 8.08 (from $7.18 to $6.36), the lower price still represents an 11% premium from yesterday's closing price. Alcanna shareholders will receive the same fixed share count from Sundial, so the difference is simply a paper loss at this point. Sundial CEO Zach George said in a statement:
Despite recent market volatility, we remain committed to our plan of arrangement with Alcanna. ..Sundial shareholders demand discipline when it comes to capital deployment, and our strong capital base is in high demand in the current environment, which is seeing increasing levels of financial distress. We respect the right of Alcanna shareholders to vote for or against the arrangement at the upcoming meeting.
With the support of ISS, George likely will get the votes he's seeking from Alcanna shareholders. Sundial shareholders won't know for sure until the final vote, which will be held next week, on Dec. 14.
