Sundial Buys Alcanna In $346 Million Deal

After the market closed on Thursday, Sundial Growers Inc. (NASDAQ: SNDL) said it was going to buy Alcanna for approximately $346 million. Alcanna (OTC: LQSIF) is one of Canada’s largest liquor retailers, operating 171 locations predominantly in Alberta under its three retail brands “Wine and Beyond”, “Liquor Depot” and “Ace Liquor”. Sundial said it is estimated that the transaction will deliver more than $15 million of additional EBITDA on an annual run-rate basis through synergies and other strategic initiatives.

In addition to that, Alcanna’s strategic partner, who owns roughly 63% of the company, Nova Cannabis Inc. (TSX: NOVC), is one of Canada’s largest cannabis retailers offering a wide range of high-quality cannabis products at value prices. Nova currently operates 62 stores across AlbertaSaskatchewan and Ontario primarily under the “Value Buds” and “Nova Cannabis” banners.

“This made-in-Alberta transaction allows Sundial to further its mission to own the customer relationship and deliver sustainable value to shareholders,” said Zach George, Chief Executive Officer of Sundial. “Alcanna’s value-focused model in liquor retailing has created market stability and we believe that the replication of this playbook in cannabis has strong potential to drive a similar result. We intend to position all of our retail exposure for profitability and strive to work with Canadian licensed producers in order to delight consumers with quality cannabis products.”

Part of the desire to buy Alcanna was the company’s stable cash generation that provides trailing twelve months of free cash flow of $16.4 million on a built-out retail platform. Another reason to buy Alcanna was the Nova store count.  Sundial noted that the combined company would make them a cannabis retail market leader with more than 170 locations. The company said in a statement that the network strengthens its position as a partner to the industry and represents a critical route to market for Canadian licensed producers.

“We believe this agreement is a testament to the value created by everyone at Alcanna and will be beneficial to all of our stakeholders,” said James Burns, Vice Chair and Chief Executive Officer of Alcanna. “We have been successful at achieving customer loyalty, and operating at levels of efficiency that are industry-leading and Sundial will provide great opportunities as a larger and significantly more liquid company. We look forward to working with Sundial to complete this transaction.”

In 2020, Aurora Cannabis sold its shares of Alcanna for C$27.6 million or C$3 per share, a big drop from the original investment of C$138 million. Alcanna shares are currently trading at C$8 a share.

Debra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief 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 Masters degree in Business Journalism from New York University.


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