DOJA Buys Tokyo Smoke With Added Boost From Aphria

Cannabis Company Limited known as DOJA Cannabis (DJACF)  is merging with TS Brandco Holdings, known as Tokyo Smoke as DOJA buys all of TS Brandco’s outstanding and issued shares. The combined company will be known as Hiku Brands Company Ltd. and will house the cannabis brands of DOJA, Tokyo Smoke, and Van der Pop.

As part of the agreement, Aphria (APHQF) has committed to making a $10 million strategic equity investment into the new company Hiku and the parties have agreed to a supply agreement for Hiku’s brands. As a result of this deal, Hiku will be hitting the market with a solid $31 million in cash.

The Retail Push

Both DOJA and Tokyo Smoke have been positioning themselves as lifestyle brands. This deal will now allow the companies to sell exclusive products in their own retail locations. According to the company statement, “Hiku will have seven operational, legal cannabis accessory stores with locations across Canada (Ontario, Alberta and British Columbia). Hiku will prioritize retail expansion in provinces allowing private cannabis retail and Tokyo Smoke and DOJA will respond to the Government of Manitoba’s Request for Proposals to establish retail cannabis stores throughout the province.” The Hiku team brings with it a strong traditional retail experience with the founder of SAXX Underwear and a $100 million+ business at Google.

Management Commentary

“We have created the leading brand house in Cannabis,” said Trent Kitsch, CEO of DOJA. ” Where high quality and design will shape the Cannabis Future. I am confident Hiku will be trusted by consumers to design better customer experiences and products, resulting in greater market share. Tokyo Smoke’s experienced management team has proven its ability to build and acquire respected cannabis brands and create brand awareness in a difficult-to-navigate regulatory environment. The combination of cannabis production, retail footprint, and a portfolio of cannabis brands gives us the opportunity to realize the significant value of complete vertical integration.”

“This strategic investment in and supply agreement with Hiku further bolsters our relationship with Tokyo Smoke and now DOJA, and reaffirms our commitment to expanding our product offering ahead of the recreational market,” said Vic Neufeld, Chief Executive Officer of Aphria. “This transaction has the twofold benefit of providing us access to strong brands, through Tokyo Smoke and DOJA, and craft-cultivated British Columbia bud, through DOJA. Quality product and recognizable consumer brands will be key differentiators for patients and consumers, and we’re looking forward to continuing our work with Hiku to create premium cannabis brands in Canada.”

Deal Terms

 DOJA will acquire all of the outstanding Tokyo Smoke Shares in exchange for shares of DOJA. Based upon the number of Tokyo Smoke Shares outstanding as at December 21, 2017, if the Merger is completed, DOJA will issue approximately 55.6 million DOJA Shares to the shareholders of Tokyo Smoke in exchange for their Tokyo Smoke Shares. DOJA shares were lately trading at $1.11 on the OTC Marketplace.

Aphria, along with Uji Capital known as the strategic investors have entered into binding agreements to acquire from DOJA 8,992,805 subscription receipts of DOJA at a purchase price of $1.39 per receipt, equivalent to DOJA’s five-day volume weighted share price, for aggregate gross proceeds of $12.5 million.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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