What happened
SNDL (SNDL -2.50%) investors enjoyed a nice high early on Tuesday, with their stock rising by over 5%. That buzz didn't last, though, and by the end of the day SNDL crashed to a 1% decline at market close. The initial euphoria was related to one of the acquisitive Canadian marijuana company's recent asset buys.
So what
Tuesday afternoon, The Valens Company (VLNS) announced that the Ontario Superior Court of Justice granted a final order approving its absorption into SNDL. This was the final key step for the deal to be approved.
Eager for expansion, SNDL agreed to purchase Valens last August in an all-stock deal valued at roughly 138 million Canadian dollars ($102 million). The non-cash nature of the buy was a neat way for SNDL to keep its balance sheet clean; in its announcement that it was purchasing Valens, the company didn't hesitate to mention that the combined business would boast CA$314 million ($231 million) in net cash, and zero debt.
Like numerous other Canadian pot companies, SNDL is attempting to shape its business and achieve scale through acquisitions. Another notable deal engineered by SNDL was its purchase of Zenabis, a down-at-heel peer that had filed for creditor protection in early 2022.
Now what
Technically speaking, the SNDL/Valens deal isn't fully closed yet, despite the court order. Valens took pains to point out that it is subject to "certain other customary closing conditions," however these aren't likely to halt SNDL's latest buy.
What might have quickly dampened investor enthusiasm for the court's decision was developments south of the Canadian border. A new House of Representatives convened for the first time; unfortunately for North American marijuana reform advocates, this body will have a slight majority of Republicans -- the party that has generally been more resistant to U.S. legalization efforts.
