Consolidation continues within the increasingly competitive Canadian cannabis sector, with Alcanna Inc (TSX: CLIQ) and YSS Corp (TSXV: YSS) this morning announcing a combination of cannabis operations in an all-stock transaction. The transaction effectively will see Alcanna’s cannabis operations spun-out, with the firm then performing a reverse takeover of YSS Corp, to form what will be known as Nova Cannabis Inc.
The combined entity is expected to have a strong position within the Canadian cannabis retail sector, with a total of 53 operating locations across Alberta, Saskatchewan, and Ontario, with a further 9 locations in development. Of these locations, 80% are currently slated to be renamed to “Value Buds”, with the company looking to dominate the value-conscious portion of the market.
Darren Karasiuk, currently an independent director of Alcanna and a former executive officer of Aurora Cannabis, is expected to lead the company in the role of CEO upon closing. James Burns, CEO of Alcanna, meanwhile is expected to become Chair of the company. The remaining management team is expected to be provided by Alcanna, with management and administrative services to be provided “at a cost that is anticipated to be far less than a stand-alone company could achieve.” Management services will then be brought in-house once critical size is achieved.
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A minimum $25.0 million financing is to be undertaken by the spin-out from Alcanna, valuing the operation at $130 million in total once completed. YSS shareholders meanwhile will see their portion of the company appointed a valuation of $0.1635 per share, giving it a valuation of $22.75 million.
The $25.0 million financing meanwhile will see subscription receipts sold at $3.00 each, which will convert to one common share of the issuer upon closing.
Following the close of the transaction, the company is anticipated to trade on the TSX Venture, and will immediately apply to list on the TSX. YSS shareholders are expected to hold 14.7% of the resulting company, while Alcanna holds 69.2%, with the remaining 16.1% will be owned by investors in the financing.
Closing of the transaction is anticipated to occur on March 1, 2021, following the approval of YSS Corp shareholders.
YSS Corp last traded at $0.12 on the TSX Venture.
Information for this analysis was found via Sedar and YSS Corp. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.
