Sundial Buys Inner Spirit In Deal Valued At $131 Million

Sundial Growers Inc. (NASDAQ: SNDL)  is buying Inner Spirit Holdings Ltd. (CSE: ISH) (OTCQB: INSHF) in a deal valued at approximately $131 million. Inner Spirit is better known as the retailer and franchisor of Spiritleaf recreational cannabis stores across Canada. The Spiritleaf network includes 86 franchised and corporate-owned locations, all operated with an entrepreneurial spirit and with the goal of creating deep and lasting ties within local communities. The deal is expected to close in the third quarter of 2021.

Spiritleaf’s franchised and corporate stores have served 2.3 million guests in 2020. The retail brand has earned a reputation as a knowledgeable and trusted source of recreational cannabis while offering a premium consumer experience. Spiritleaf opened its 86 th store on April 28, 2021, in Edmonton, Alberta, and is projected to exceed the 100-store milestone in the summer of 2021.

“Sundial is the ideal company to acquire Inner Spirit and support the future development of the Spiritleaf retail cannabis brand,” said Darren Bondar, Founder, President and Chief Executive Officer of Inner Spirit. “The Sundial team has shown a strong commitment to our management team, franchise partners, and employees as well as our growth ambitions. The combination will enable us to further expand our position as the country’s leading retail cannabis brand for customers and communities and will open up new market opportunities to us. We’re also very pleased Inner Spirit shareholders will be able to participate in our future success through an ongoing equity ownership.”

Sundial made noise in January when the company priced an offering in which it would receive approximately $100 million. At the time, the company said it planned on using the money for possible acquisitions of, or investments in, equipment, facilities, assets, equity or debt of other businesses, products or technologies and for working capital and general corporate purposes. In November, Sundial reported that its third-quarter revenue fell 36% to just $15.5 million. The company also delivered a whopping net loss of $71.4 million. This was almost double the net loss of $32.8 million for the three months ending June 30, 2020. 

Deal Terms

Inner Spirit’s shareholders will receive, for each Inner Spirit common share held, (i) $0.30 in cash and (ii) 0.0835 of a Sundial common share (representing $0.09 per Inner Spirit common share based on the 10-day volume-weighted average price of Sundial common shares on the Nasdaq Capital Market), for total consideration of $0.39 per Inner Spirit common share. The purchase price of $0.39 per Inner Spirit common share represents a premium of 54.8% to the 10-day VWAP of Inner Spirit common shares on the Canadian Securities Exchange (the “CSE”) and a premium of 62.5% to the closing price of Inner Spirit common shares on the CSE on May 4, 2021.

“Sundial becomes a stronger and more diverse cannabis company by acquiring Inner Spirit and the Spiritleaf retail store network,” said Zach George, Chief Executive Officer of Sundial. “Inner Spirit has successfully created a franchise-based retail network that has grown from coast to coast and offers a differentiated and premium in-store experience to consumers. Our shared Albertan roots and commitment to data-driven consumer insights make for an ideal partnership. Sundial’s capital base will enable us to support continued expansion and deepen the capabilities of the Spiritleaf retail brand.”

The company said the deal is expected to provide modest synergies and economies of scale due to the different business models of Sundial and Inner Spirit.

 

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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