Canopy Rivers Announces Investment From Canopy Growth and Bought Deal Financing for Total Gross Proceeds of $85 Million
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
TORONTO, Feb. 04, 2019 (GLOBE NEWSWIRE) - Canopy Rivers Inc. (TSXV:RIV) (“Canopy Rivers” or the “Company”) is pleased to announce that it has entered into an agreement with CIBC Capital Markets (“CIBC”) and Eight Capital (together with CIBC, the “Joint Bookrunners”), under which the Joint Bookrunners have agreed to purchase, together with a syndicate of underwriters (the “Underwriters”), 11,500,000 subordinated voting shares of the Company (the “Subordinated Voting Shares”) on a “bought deal” basis at a price of $4.80 per Subordinated Voting Share (the “Issue Price”) for gross proceeds of approximately $55.0 million (the “Bought Deal”).
Concurrent with the Bought Deal, Canopy Growth Corporation (“Canopy Growth”), the Company’s largest shareholder, will purchase a minimum of 6,250,000 Subordinated Voting Shares on a private placement basis, at a price per Subordinated Voting Share equal to the Issue Price (the “Private Placement” and together with the Bought Deal, the “Offering”) for additional gross proceeds of a minimum of approximately $30.0 million. Canopy Growth currently owns approximately 26.5% of the issued and outstanding shares of the Company on a non-diluted basis and has elected to subscribe under the Private Placement for more than its pro rata participation right. Following completion of the Offering (prior to giving effect to the Over-Allotment Option (as defined below)), Canopy Growth’s ownership interest in the Company will increase to approximately 27.3% of the issued and outstanding shares of the Company on a non-diluted basis. The combined gross proceeds to the Company under the Offering will be a minimum of approximately $85 million.
The Company has agreed to grant the Underwriters an over-allotment option (the “Over-Allotment Option”) to purchase up to an additional 1,725,000 Subordinated Voting Shares at the Issue Price, exercisable in whole or in part, at any time on or prior to the date that is 30 days following the Closing Date (as defined below). If this option is exercised in full, an additional approximately $8.3 million will be raised pursuant to the Bought Deal, the aggregate gross proceeds of the Bought Deal will be approximately $63.3 million, and the combined gross proceeds to the Company under the Offering will be a minimum of approximately $93.3 million.
The Company intends to use the net proceeds from the Offering for follow-on investments in existing portfolio companies, new domestic and international investments, working capital and general corporate purposes.
Closing of the Offering is scheduled to be on or about February 27, 2019 (the “Closing Date”) and is subject to certain customary conditions including, but not limited to, the receipt of all necessary approvals, including the approval of the TSX Venture Exchange (the “TSXV”) and the applicable securities regulatory authorities.
The Subordinated Voting Shares issued pursuant to the Bought Deal will be offered by way of a short form prospectus to be filed in all of the provinces of Canada, except Quebec, pursuant to National Instrument 44-101 - Short Form Prospectus Distributions. The Subordinated Voting Shares issued pursuant to the Private Placement will be offered pursuant to an exemption from the prospectus requirements of applicable securities laws and will be subject to a statutory hold period under Canadian securities legislation for four months and one day following the Closing Date, and statutory restrictions on the distribution of shares from the holdings of a control person.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States. The Subordinated Voting Shares have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) or the securities laws of any state of the United States, and may not be offered or sold in the United States, or to or for the account or benefit of a U.S. person (as defined in Regulation S under the U.S. Securities Act) unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
Canopy Growth controls a majority of the voting rights in Canopy Rivers and holds approximately 26.5% of the issued and outstanding shares of the Company on a non-diluted basis. Canopy Growth’s participation in the Private Placement (the “Insider Participation”) will be considered to be a “related party transaction” within the meaning of TSX Venture Exchange Policy 5.9 and Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). Pursuant to Section 5.5(a) and 5.7(1)(a) of MI 61-101, the Company is exempt from obtaining a formal valuation and minority approval of the Company’s shareholders with respect to the Insider Participation as the fair market value of the Insider Participation in the Offering is below 25% of the Company’s market capitalization as determined in accordance with MI 61-101.
About Canopy Rivers
Canopy Rivers is a unique investment and operating platform structured to pursue investment opportunities in the emerging global cannabis sector. Canopy Rivers works collaboratively with Canopy Growth (TSX: WEED, NYSE: CGC) to identify strategic counterparties seeking financial and/or operating support. Canopy Rivers has developed an investment ecosystem of complementary cannabis operating companies that represent various segments of the value chain across the emerging cannabis sector. As the portfolio continues to develop, constituents will be provided with opportunities to work with Canopy Growth and collaborate among themselves, which Canopy Rivers believes will maximize value for its shareholders and foster an environment of innovation, synergy and value creation for the entire ecosystem.
Notice Regarding Forward Looking Statements
This news release contains statements which constitute “forward-looking information” within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to future business activities and operating performance. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions including: the completion of the Offering; the anticipated Closing Date; the expected gross proceeds of the Offering; the use of proceeds from the Offering; the ownership interest of Canopy Growth following completion of the Offering; the ability of the Company to identify and pursue opportunities within the cannabis sector; and expectations for other economic, business, and/or competitive factors.
Investors are cautioned that forward-looking information is not based on historical facts but instead reflects management’s expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the Company. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: changes in general economic, business and political conditions, including changes in the financial markets; potential conflicts of interest; the Canadian regulatory landscape and enforcement related to cannabis, including political risks and risks relating to regulatory change; changes in applicable laws; compliance with extensive government regulation; public opinion and perception of the cannabis industry; and the risk factors set out in the joint management information circular of Canopy Rivers Corporation and the Company dated August 8, 2018, filed with Canadian securities regulators and available on the Company’s profile on SEDAR at www.sedar.com.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Sr. Director, Investor Relations & Communications
Executive Vice President, Strategy