SNDL and Nova Cannabis shared they’re amending their previously announced strategic partnership, in a press release on April 3, 2023.
SNDL is the majority shareholder of Edmonton-based Nova after SNDL acquired Nova’s previous parent company Alcanna.
In December, SNDL announced it would be divesting some of its retail portfolio by selling 26 cannabis retail stores into Nova’s cannabis retail business. The move is being made to reduce SNDL’s financial risk from its retail stores.
You can read more about the original announcement here. Last week, SNDL and Nova Cannabis announced amendments to their original agreement.
Increased Number of Store Acquisitions
Nova will now be acquiring 31 stores versus the original 25. The additional stores are located primarily in Toronto and Vancouver. The 31 stores include 12 in Alberta, 11 in Ontario, three in British Columbia, three in Saskatchewan, and two in Manitoba.
The stores will operate primarily under the Spiritleaf and Superette banners. Nova will have first right of refusal on SNDL’s Canadian cannabis pipeline.
Changing Equity and Reduced Ownership
In the original agreement, approximately 14.3 million common shares of Nova held by SNDL’s holdings were to be returned to Nova’s treasury for cancellation. This has been significantly reduced to approximately 2.01 million shares.
SNDL has also agreed to increase the number of Nova shares to be distributed pursuant to a capital distribution of Nova shares owned by SNDL to holders of common shares of SNDL. SNDL will hold approximately and no more than 19.9% of the issued and outstanding Nova shares.
As a result of SNDL’s ownership in the Nova shares being reduced below 20%, Nova will be permitted to directly own and operate cannabis retail stores in Ontario and British Columbia, in accordance with applicable laws.
Other Aspects of the Amended Deal
Other aspects of the amended agreement include:
- Nova’s revolving credit facility of $15 million from SNDL “is to be eliminated by way of capital contribution by SNDL, which is expected to be fully drawn by Nova at the time of closing.” SNDL will lend Nova a new $15 million revolving credit facility with a possible $10 million accordion.
- SNDL will agree not to “demand repayment of, or take any action relating to, any amounts drawn by Nova on the existing credit facility between Nova and SNDL prior to June 30, 2023, except in connection with circumstances” that would have “a material adverse effect” on Nova.
- SNDL will continue to provide management and administrative services to Nova with a three-year fee holiday, after which Nova will pay SNDL 2 million annually.
- Nova will transfer the intellectual property related to the “Value Buds” brand to SNDL.
- Licensing agreements will allow Nova to use SNDL’s retail banners (Value Buds, Spiritleaf and Superette) in exchange for an annual fee.
- Nova will also grant SNDL “certain nomination rights to the Nova board.”
The amended deal is subject to stock exchange and shareholder approvals and is expected to be completed prior to June 30, 2023.
Shared Vision to Transform the Retail Market
“This amendment reflects the strong commitment and shared vision of SNDL and Nova to build a long-lasting and mutually beneficial partnership and further transform the cannabis retail market in Canada,” says Anne Fitzgerald, lead independent director of Nova. “Together, we will build on our disruptive cannabis retail platform and deliver exceptional customer experiences by leveraging our unique strengths and expertise. This partnership demonstrates our unwavering commitment to driving growth and value for our stakeholders.”
Nova Announces Record Fourth Quarter 2022 Revenue
At the end of March, Nova announced its fourth quarter and year end 2022 results. The company reported record revenue of $61.4 million for the quarter and $226.4 million annual revenue, a 68.5% increase from 2021.