CALGARY - SNDL Inc. (NASDAQ: SNDL) and Nova Cannabis Inc. (TSX: NOVC) have announced an agreement where SNDL will purchase all remaining shares of Nova not currently owned by SNDL, representing about 34.8% of Nova, for approximately $40 million. This acquisition is expected to close by October 18, 2024.
Under the terms of the agreement, Nova shareholders will receive $1.75 in cash for each share or have the option to receive 0.58 of an SNDL common share, subject to a 50% maximum of the aggregate consideration payable in SNDL shares. The cash consideration represents a 41.2% premium to the 20-day volume-weighted average price (VWAP) of Nova shares on the TSX as of August 12, 2024.
The transaction aims to leverage Nova's retail expertise across SNDL's cannabis retail portfolio, enhancing programming, data programs, staff training, and inventory management. Expected benefits include cost savings through streamlined expenses and optimized general and administrative costs. SNDL's strong balance sheet is also anticipated to support Nova's retail platform in a competitive market.
Both companies' boards have approved the transaction, which is also subject to the approval of at least two-thirds of Nova shareholders and a majority of disinterested Nova shareholders. A special meeting of Nova shareholders is expected to be held in October 2024 to vote on the arrangement.
Nova's independent directors, advised by Eight Capital, have determined the arrangement is in the best interests of Nova and fair to its shareholders. Eight Capital provided a valuation range for Nova shares of $1.40 to $1.90 and deemed the consideration financially fair.
Following the transaction's close, Nova shares will be delisted from the TSX, and Nova will cease to be a reporting issuer in Canada. Nova's directors, executive officers, and Cannell Capital, LLC, controlling approximately 13% of Nova shares, have agreed to vote in favor of the transaction.
This consolidation within the Canadian cannabis industry is based on a press release statement and reflects SNDL's strategy to create a consumer-centric model at scale, with a focus on sustainable performance and profitable growth.
InvestingPro Insights
As SNDL Inc. moves to acquire Nova Cannabis Inc., investors are keenly observing the financial metrics and market performance of NOVC. According to real-time data from InvestingPro, Nova Cannabis Inc. presents a compelling picture with a market capitalization of $57.82 million USD. The company's P/E ratio stands at 24.72, which is noteworthy given the adjusted P/E ratio for the last twelve months as of Q2 2024 is lower at 14.25, suggesting a more attractive valuation when considering the company's earnings over the past year.
InvestingPro Tips highlight that Nova Cannabis is trading at a low P/E ratio relative to near-term earnings growth, which can be an indicator of the company's potential undervaluation. Moreover, analysts predict that the company will be profitable this year, a significant factor for investors considering the acquisition's potential impact on SNDL's financial health. The fact that NOVC's stock price often moves in the opposite direction of the market could also be of interest to investors looking for diversification benefits or counter-cyclical investment opportunities.
Additional insights from InvestingPro reveal that NOVC has had a high return over the last year, with a 172.34% price total return, and the company's liquid assets exceed its short-term obligations, indicating a solid financial position. This information may reassure Nova shareholders as they assess the acquisition offer from SNDL.
For investors seeking a deeper analysis, there are 6 additional InvestingPro Tips available for NOVC, which can be accessed on the platform to further inform investment decisions. The insights provided by InvestingPro, including both the tips and real-time data metrics, serve to enrich the understanding of NOVC's current financial health and future prospects amidst the acquisition process.
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