Aphria Inc shares (NYSE:APHA) slid Wednesday after the Canadian cannabis producer rebuffed US rival Green Growth Brands Inc’s hostile takeover bid on the view that it “significantly undervalued” the company and is “inadequate”.
Green Growth first put an offer to buy Aphria on the table in December, which was also rejected, and then last month, introduced a second nearly identical unsolicited bid for Aphria, which put its value at roughly C$2.35 billion (US:$1.76 bn).
On Wednesday, Aphria issued a statement saying its board had moved to reject the hostile bid, arguing that it would have given Green Growth shareholders a 36% interest in Aphria in exchange for shares in a company with "limited" operations.
“The Aphria Board of Directors unanimously believes that GGB’s hostile offer is significantly undervalued and inadequate and not in the interest of Aphria shareholders on multiple grounds,” said Irwin Simon, Aphria’s board chairman in a statement.
The potential takeover would also have had “negative repercussions, including delisting from the TSX and NYSE and a potential reduction in interest from strategic partners,” according to the statement.
Aphria’s shares took a hit last December in the wake of the release of a critical report from short sellers Quintessential Capital Management and Hindenburg Research, which cast doubt on the company’s dealings in Latin America. In response to the criticism, Aphria’s board appointed a special committee to investigate the short-sellers’ allegations.
News of Aphria’s rejection of Green Growth’s bid also comes at a time of uncertainty for Aphria’s management. Last month, Aphria’ said its CEO and co-founder Vic Neufeld will step down from the company’s helm.
Investors failed to applaud the news, sending Aphria shares down 6.16% to $10.05 before the opening bell on Wednesday.
Contact Ellen Kelleher at [email protected]