VANCOUVER, June 28, 2019
/CNW/ - Hempco Food and Fiber Inc. ("Hempco") (TSX-V: HEMP) is
pleased to announce that further to the joint news release dated
April 16, 2019 with Aurora Cannabis
Inc. ("Aurora") (NYSE: ACB) (TSX: ACB) (Frankfurt: 21P; WKN: A1C4WM), it has entered
into a definitive arrangement agreement (the "Arrangement
Agreement"). Subject to the terms and conditions of the Arrangement
Agreement, Aurora has agreed to acquire all of the issued and
outstanding common shares of Hempco not already owned by it
("Hempco Shares") in exchange for common shares of Aurora ("Aurora
Shares")(the "Transaction"). Aurora currently owns 32,872,294
Hempco common shares (approximately 51.4% of the issued and
outstanding Hempco common shares on an undiluted basis) and a
convertible debenture in the face amount of $5,000,000, which may be converted at any time at
Aurora's election into Hempco common shares at a conversion price
of $1.18 per conversion share.
If all of the principal amount of this convertible debenture were
converted Aurora would receive an additional 4,237,288 Hempco
common shares (approximately 52% on a fully diluted basis, or 54.5%
on a partially diluted basis).
Under the terms of the Arrangement Agreement, Aurora will, upon
completion of the Transaction, issue approximately 0.08659 Aurora
Shares in exchange for each Hempco Share (the "Exchange
Ratio") not already owned by Aurora. The Exchange Ratio
was based on relative share values of $1.04 per Hempco Share, representing a 14%
premium to the share price on April 15,
2019, and $12.01 per
Aurora Share, representing the
volume-weighted average price per Aurora
Share on the Toronto Stock Exchange for the five-trading-day
period ending on April 11, 2019 – the
day before the parties signed the binding letter agreement
concerning the Transaction . Hempco shareholders will not
receive any cash in the Transaction. In addition, each
outstanding stock option to acquire Hempco Shares will, following
completion of the Transaction, entitle the holder to receive, upon
the exercise thereof, approximately 0.08659 Aurora Shares for each
Hempco Share, at a price adjusted in accordance with the Exchange
Ratio, and otherwise on the same terms and conditions as the
original option or warrant.
Arrangement Overview
The Transaction will be effected by way of a court-approved plan
of arrangement under the provisions of the Business Corporations
Act (British Columbia) (the
"Arrangement").
The board of directors of Hempco (the "Hempco Board")
formed a committee of independent directors (the "Hempco
Independent Committee") to, among other things, review and
evaluate the terms of the Transaction, to obtain and supervise the
preparation of a formal valuation of the Hempco Shares, to make a
recommendation to the Hempco Board in respect of the Transaction,
and to negotiate the terms and conditions of the Arrangement
Agreement and related matters.
Fort Capital Partners was retained by the Hempco Independent
Committee to provide, under the supervision of the Hempco
Independent Committee, an independent formal valuation (the
"Formal Valuation") prepared in accordance with
Multilateral Instrument 61-101 – Protection of Minority
Securityholders in Special Transactions ("MI 61-101"),
and has concluded that, based upon and subject to the assumptions,
limitations and qualifications contained in its written valuation,
as at April 12, 2019, the fair market
value of the Hempco Shares is in the range of C$0.75 to C$1.07
per such share.
Fort Capital Partners has also provided the Hempco Independent
Committee and the Hempco Board with a fairness opinion (the
"Fairness Opinion") that, based upon and subject to the
assumptions, limitations and qualifications contained in the
Fairness Opinion, the consideration to be received by Hempco
shareholders pursuant to the Arrangement is fair, from a financial
point of view, to such Hempco shareholders.
The Arrangement was unanimously recommended by the Hempco
Independent Committee to the Hempco Board. The Hempco Board
(other than directors who are not independent of Aurora accordingly
abstained from voting on the transactions contemplated by the
Arrangement Agreement), after receiving the unanimous
recommendation of the Hempco Independent Committee, as well as the
Formal Valuation and the Fairness Opinion, has unanimously
determined that the consideration to be received by Hempco
shareholders pursuant to the Arrangement is fair from a financial
point of view to Hempco shareholders, and that the Arrangement is
in the best interests of Hempco. Therefore, the Hempco Board has
approved both the Arrangement and the Arrangement Agreement, and
recommends that Hempco shareholders vote in favour of the
Arrangement.
All of the directors and officers of Hempco (who hold in the
aggregate approximately 4.5% of the issued and outstanding Hempco
Shares on a non-diluted basis) have entered into support agreements
with Aurora pursuant to which they have agreed, among other things,
to support the Transaction and vote their Hempco Shares in favour
of the Arrangement.
Completion of the Arrangement is subject to approval by the
Supreme Court of British Columbia
and the affirmative vote of Hempco shareholders at a special
meeting of shareholders that is expected to be held on August 13, 2019 (the "Meeting"). At the
Meeting, the Arrangement will require approval by at least
two-thirds (66⅔%) of the votes cast by Hempco shareholders present
in person or represented by proxy and entitled to vote at the
Meeting and a majority of the votes cast by Hempco shareholders
after excluding the votes cast by certain "related parties", as
such term is defined in MI 61-101. Aurora is such a "related
party".
The Arrangement is subject to customary conditions, including
support of the transaction by directors and officers of Hempco and
receipt of applicable regulatory and third-party approvals, and
consents as may be required to effect and complete the transaction,
including approval of the Toronto Stock Exchange and New York Stock
Exchange (in respect of Aurora) and the TSX Venture Exchange (in
respect of Hempco). The Arrangement Agreements includes
customary provisions, including fiduciary-out provisions –
covenants to not solicit other acquisition proposals and the right
to match any superior proposal. In addition, the Arrangement
Agreement contains a reciprocal expense reimbursement provision of
up to $200,000 payable to the other
party if the transaction is terminated in certain
circumstances.
Assuming that all requisite approvals are received, Aurora and
Hempco expect to close the proposed Arrangement in the third
quarter of 2019 or such other date as the parties may agree.
Until closing, Hempco will continue to be managed by the Hempco
Board and John Ross, Hempco's Chief
Financial Officer and interim Chief Executive Officer. Upon
completion of the Arrangement, all of the members of the Hempco
Board will resign and the current management team of Aurora will
manage Hempco after completion of the Arrangement.
The terms of the Arrangement will be described in further detail
in the management information circular of Hempco to be filed with
regulatory authorities and mailed to Hempco shareholders in
July 2019 in accordance with
applicable securities laws.
In connection with the Arrangement, the parties have entered
into a loan agreement whereby Aurora has agreed to provide to
Hempco a loan of up to $4 million to
be disbursed in accordance with such loan agreement and a budget
agreed to between the parties.
Hempco security holders and other interested parties are advised
to read the materials relating to the proposed Arrangement,
including the Arrangement Agreement, that will be filed by Hempco
with securities regulatory authorities in Canada when they become available.
Anyone may obtain copies of these documents, when available, free
of charge, at the Canadian Securities Administrators' website at
www.sedar.com.
About Hempco
For more than 12 years Hempco has been a trusted and respected
pioneer, innovator and provider of quality, hemp-based foods, hemp
fiber and hemp nutraceuticals. Hempco produces and markets the
brands PLANET HEMP™ and PRAISE, hemp-based foods and nutritional
supplements for people and animals. Hempco is expanding its
processing ability to meet global demands in a 56,000 sq. ft.
facility located at Nisku,
Alberta. Hempco's common shares trade on the TSX Venture
Exchange under the symbol "HEMP".
Forward looking statements
This news release includes statements containing certain
"forward-looking information" within the meaning of applicable
securities law ("forward-looking statements"). Forward-looking
statements are frequently characterized by words such as "plan",
"continue", "expect", "project", "intend", "believe", "anticipate",
"estimate", "may", "will", "potential", "proposed" and other
similar words, or statements that certain events or conditions
"may" or "will" occur. Forward-looking statements in this
news release include, but are not limited to, statements with
respect to the anticipated closing of the Arrangement, the
anticipated consideration to be received by Hempco shareholders,
the timing and satisfaction of closing conditions including: (i)
Hempco shareholder approval; (ii) court approval of the
Arrangement; (iii) the availability of termination rights available
to the parties under the Arrangement Agreement; (iv) stock exchange
approval; and (vi) other closing conditions, including, without
limitation, the operation and performance of the Hempco business in
the ordinary course until the closing of the Arrangement.
These statements are only predictions. Various assumptions
were used in drawing the conclusions or making the projections
contained in the forward-looking statements throughout this news
release. Forward-looking statements are based on the opinions
and estimates of management of Hempco at the date the statements
are made, and are subject to a variety of risks and uncertainties
and other factors that could cause actual events or results to
differ materially from those projected in the forward-looking
statements. Hempco is under no obligation, and expressly disclaims
any intention or obligation, to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as expressly 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.
SOURCE Hempco Food and Fiber Inc.