Sundial Growers Inc. (NASDAQ:SNDL) is purchasing Canadian liquor retailer Alcanna Inc. (TSX:CLIQ) for roughly $346 million.

The Deal Details

Based in Calgary, Alberta, the company said Thursday that it agreed to acquire all of the issued and outstanding common shares of Alcanna.

Under the terms of the agreement, Alcanna's shareholders will receive, for each Alcanna common share held, 10.69 common shares of Sundial, representing a deemed value of $9.12 per Alcanna share.

The transaction has been unanimously approved by the boards of directors of both companies and is expected to close in December 2021 or in the first quarter of 2022.

What It Means For Sundial

Apart from Alcanna's longstanding liquor business with trailing twelve months free cash flow of $16.4 million on a built-out retail platform, the acquisition brings Sundial an enhanced exposure with investment in Nova Cannabis Inc. (TSX:NOVC), a publicly listed, pure-play cannabis retail operator, in which Alcanna holds an approximately 63% equity interest.

Alcanna currently operates 171 locations predominantly in Alberta under its three retail brands, Wine and Beyond, Liquor Depot and Ace Liquor.

Nova operates 62 stores across Alberta, Saskatchewan, and Ontario primarily under the Value Buds and Nova Cannabis banners.

The transaction is expected to deliver more than $15 million of additional EBITDA on an annual run-rate basis through synergies and other strategic initiatives.

What's Next For Sundial

Zach George, the company's s CEO, said that "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."

George stressed that the company intends 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."

During the last iteration of the Benzinga Cannabis Capital Conference, which is returning in a live format next week in New York City, George discussed the saturation of the Canadian cannabis market and the ways that retail traders are helping Sundial's turnaround, citing price compression, regulatory dysfunction, and market share competition as the main factors that currently affect the market.

Price Action

Sundial's shares traded 15.2778% higher at $0.747 per share during the pre-market session on Friday morning.

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