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The Flowr Corporation announces strategic acquisition of Terrace Global in all-stock deal

The acquisition significantly bolsters Flowr’s balance sheet with more than $31 million in cash and marketable securities to support growth

The Flowr Corporation - The Flowr Corporation announces Strategic Acquisition of Terrace Global
Transaction significantly reduces Flowr’s outstanding indebtedness by $11.9 million as a result of the early conversion of 10% subordinated secured debentures and up to $21.6 million in debentures

The Flowr Corporation (CVE:FLWR) (OTCMKTS:FLWPF) announced on Tuesday that it has entered into a definitive agreement to acquire all the shares in Terrace Global Inc (CVE:TRCE), a multi-country operator (MCO) led by experienced cannabis entrepreneurs focused on the acquisition of international cannabis assets.

The all-share acquisition is valued at around $63 million based on Flowr’s closing share price on October 19, 2020. The transaction provides the company with additional capital to execute on its growth strategy, and seeks to merge together two teams of successful cannabis entrepreneurs, said the company. The transaction is expected to close by the end of 2020.

“We are extremely excited to deepen our existing relationship and partnership with Terrace Global into a full combination of the two companies. Together, we believe that we have a more robust financial profile which will give us sufficient access to liquidity to pursue our strategic objectives in Canada and internationally,” Flowr CEO Vinay Tolia said in a statement.

READ: The Flowr Corporation closes on fifth tranche of C$3M agreement with Terrace Global to help fund its medical cannabis site in Portugal

“The team at Terrace has a great deal of success in the Cannabis industry and we are very pleased to have them join the Flowr family in our mission to create one of the preeminent players in the industry for years to come,” he added.

The company believes that owning Terrace Global will create better operating efficiencies within its existing joing venture partnership in its European business as Holigen continues to scale its operations. In addition, the company has identified around $2 million in cost synergies from joining two public company’s infrastructures.

“On a pro forma basis, the company will have more than $31 million of cash and marketable securities on its balance sheet,” said the company.

Transaction highlights

  • All insiders of Flowr will be required to convert their debentures into Flowr shares, representing a conversion of at least $11.9 million principal amount of debentures. Flowr will also use commercially reasonable efforts to secure the full conversion of all of the issued and outstanding convertible debentures in the aggregate principal amount of up to $21.6 million.
  • As a condition precedent to the closing of the transaction, Flowr will be required to negotiate further flexibility with its senior creditors. The net result is that at closing of the Transaction, Flowr will have reduced its overall indebtedness by at least $11.9 million.
  • The combined entity is estimated to realize annual synergies of approximately $2 million per year, allowing Flowr to operate more efficiently with a commitment to continued excellence.

The agreement provides that, under certain circumstances, where the transaction is not completed because of the failure of Flowr to obtain certain approvals or consents, Flowr would be required to reimburse Terrace Global’s expenses up to $500,000.

The board of the combined company will be comprised of five Flowr existing directors (including two directors that are independent), three nominees from Terrace Global and a new independent director mutually agreed to by Flowr and Terrace Global.

The transaction remains subject to certain closing conditions including approval by the TSX Venture Exchange.

Shares added 4.17% in Toronto to C$0.50.

---Updates for share price---

Contact the author Uttara Choudhury at uttara@proactiveinvestors.com

Follow her on Twitter: @UttaraProactive

Quick facts: The Flowr Corporation

Price: 0.415 CAD

TSX-V:FLWR
Market: TSX-V
Market Cap: $136.78 m
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The Flowr Corporation (CVE: FLWR) CEO Vinay Tolia joined Steve Darling from Proactive Vancouver to bring news the company has agreed to an equity line and profit-sharing agreement with Terrace Global for their cannabis project in Portugal. Tolia telling Proactive Terrace Global will fund...

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