Concern about the hostile takeover is causing ripples in the marijuana industry
As 2018 was wrapping up, marijuana company Green Growth out of Ohio was working on a plan to launch a hostile takeover of Canada-based marijuana producer Aphria. While it was initially seen as a positive move, resulting in Aphria’s price climbing 26%, sentiment has changed as investors and analysts think about the deal in greater detail. In order to allay concerns, Green Growth’s CEO, Peter Horvath, stepped forward to clear the air.
As investors began to question the veracity of the deal, Aphria saw its stock price drop 4.3% to $5.99 as the year ended. Green Growth has proposed a $2.1-billion unsolicited takeover of Aphria, but Hindenburg Research, a notable short-seller, called the deal “non-credible,” questioning relationships between the two companies.
Bloomberg was able to conduct a short interview with Horvath to understand the arrangements, asking several direct questions designed to help investors determine the validity of any relationship. Bloomberg asked if Horvath knew that its second-largest shareholder, GA Opportunities Corp., was backed by Aphria, to which he responded “We’ve held the line consistently that GA Opportunities was a fund that made an investment in us. We didn’t meet with the people that provided the money to them. We didn’t discuss it. It basically was brought to us, ‘Hey, we want to do a private placement with you,’ and we accepted that. Normally we don’t ask who’s behind the money because normally the answer is very complicated.
When asked if the bid was designed to “generate the appearance of demand in the hopes of spurring credible offers” for Aphria, as Hindenburg had implied, Horvath explained, “No one at Aphria said, ‘Hey, please try to buy us.’ I haven’t had that conversation. This pretty much happened independently. … I know that the folks in Canada on Bay Street are all pretty tightly knit and everybody knows everybody, so it doesn’t completely surprise me. I don’t think they made that investment hoping that we would buy them. That just seems really far-fetched.”
In the end, Horvath acknowledges that shareholders will ultimately decide whether or not to allow the deal to move forward. He said, “We don’t want to put ourselves in a position that jeopardizes our existing business, which has a lot of upside. If there’s anything that would appear inappropriate, we wouldn’t allow this to take place. We’re not into get-rich-quick schemes. We’re looking at real assets, real value, a seasoned management, and true operating capabilities. At the end of the day, this is going to be up to shareholders to decide.”
As of this writing, Aphria (NYSE: APHA) is trading up 5.61%.