offer is a publicity stunt by GGB as evidenced by several precedent conditions not the least of which is equity financing at a strike price (C$7) at a substantial premium to its own current share price (C$5.87).
Will we see some new offers ... some white knights … and possibly that this hostile takeover bid will fail? But because the US dollar is currently trading at a significant premium to the Canadian dollar, one can appreciate why Canadian companies may be targets. I personally have commented that, if successful, this may effectively amount to somewhat of a reverse takeover because Aphria shareholders may end up owning more than 60% of the combined company. Cornerstone Investments subsequently realized the same.
But I return to how odd the offer seems … a bid below (at the time) Aphria’s share price combined with a few material obstacles along the way such as the raise by GGB at a significant premium to its own share price (and therefore, market cap).
Skepticism of this M&A was also subsequently realized by an analyst and carried on BNN. Subsequently, Dmitry Zaytsev of Stoic Advisory succinctly put together what the critics and cynics are saying about this proposed M&A and shared his findings on a recent episode of the Midas Letter. If you watch that video, Mr. Zaytsev may appear to allude to suggestions of non-disclosure and non-arms-length transactions and relationships.
What I will say though is that if GGB pulls this off, it may be one of the greatest premiums realized in what I coined as “near arbitrage” (refer above link to DEEPDIVE.ca) for GGB shareholders. But to end where I began about why this may not be a publicity stunt. If we accept at face value that this effectively an RTO whereby APHA gains control of GGB then keep it simple and remove the “R” and look at it as a takeover offer by APHA or GGB. The acquiror typically pays a premium for the acquiree. Therefore, perhaps the best way to look at the “discount” on the offer of Aphria shares as the premium to be paid by shareholders of Aphria to gain control of GGB and that would be M&A 101. That is the problem with listening to and following stock influencers and paid promoters. In no way do I profess that my hypothesis will be proven correct but rather whether correct or not it is another view of the transaction and one that fits M&A 101 and strips away the conspiracy theories and all the drama. Those professing publicity students and clandestine RTO motives may appear to be
ives may appear to be
GGB takeover offer of APHA in their number crunching and as an RTO when explaining the outcome and motives behind the outcome. They should have been using the M&A 101 metrics from the perspective of a takeover offer by APHA or GGB if their theory was indeed to prove an RTO attempt.
We foresaw M&A activity as far back as my first article appearing in the US edition a few years back because the consolidation curve cannot be avoided or side stepped. In December, we alerted you to the fact that Emblem appeared to be ideal for investing in and we know what happened within days of our published content. A more recent M&A involves Westleaf’s M&A of a private company (Canndara Canada Inc).
I wish I could say we predicted this supply shortage facing Canada when others did not (one former top industry personality even went as far as predicting a gluttony) but the truth is one cannot take credit for predicting that the sun will set each day in the West. What we can take credit for predicting is that the shortage could last years whereas some assumed that an equilibrium would be realized within months of the end of prohibition. This recent article (BNN Bloomberg) validates our prediction as evidenced by its model projecting shortages outward as far as five years. As an investor this is a strong indicator that substantial growth may exist for some time and there will be a rise of opportunities in the ancillary market. It is not by coincidence that 3 Sixty Services Corp (CSE:SAFE) is our feature company this month and I hope you take a few months to read our exclusive interview and Q&A with their CEO Thomas Gerstenecker.
Always remember that despite what I feel is our industry leading strategies and content with proven superior returns and that our models and content are sometimes copied by others - all our content is to raise awareness and education and is not considered investment, financial, or health advice.
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