Columbus Based Schottenstein Family Makes $2.8B Aphria Bid
Posted by Craig Jones on Jan 09, 2019
On December 27th, Green Growth Brands, a Schottenstein family controlled company, announced a $2.8b hostile bid to take-over publicly traded Aphria Inc. The bid was rejected the following day. This would be the first hostile takeover attempt of a publicly traded medical cannabis company. It was surprising to see this bid happen, with questions about the company and big pocketed investors involved. But the Schottenstein family feels that with their retail chops and Aphria’s production capabilities, they can create a well integrated retail and growing powerhouse.
The financing for the bid was made possible by the immense Schottenstein retail empire that includes large stakes in private retailers and American Eagle and DSW. Jay Schottenstein is in fact the executive chairman of the board and CEO of AEO executive chairman and director of DSW, both publicly traded companies. Green Growth is their retail cannabis company and despite owning just one retail location, it launched a hostile takeover bid for Aphria.
Aphria responded by rejecting the bid, saying “The proposed bid would be about 23 percent below Aphria’s average share price over a 20-day period.” However, it was a 46 percent premium to the previous Monday closing price. Aphria’s stock price had recently plunged more than its competitors and the overall market, due to attacks from shortsellers. The deal has been further criticized as a related-party transaction publicity stunt to fake out the shortsellers.
This deal brings with it interesting elements that test the realms of current law. For example, the US NYSE Aphria listing will conflict with Green Growth's current US retail operations. The merged entity will likely only be able to maintain Green Growth’s Canadian listing on the CSE to avoid running afoul of the US laws. That result is clearly not optimal, but the company will be well positioned if and when the US laws are reformed.
The CEO of Green Growth is the long time Schottenstein partner Peter Horvath and he is publicly vouching for the legitimacy of the bid in the face of recent skepticism. Horvath recognizes the potential of the merged entity in the nascent market. Aphria is actually a company with much of its value in investments in other companies rather than having a massive footprint of production capabilities like Canopy Growth and Aurora.
Green Growth currently owns one retail dispensary location. Horvath said in a recent interview, “We have a second that we have an option to buy in Nevada. We were awarded seven licenses in Nevada. We also recently closed on a purchase of a Massachusetts license that gives us a grow facility, a processing facility and three stores.” This marked the end of the near term obtainable targets while he went on to say that they are working with six different major US mall developers. Horvath went on to make the seemingly farfetched prediction, “We believe that by the end of this year we’re going to have 300 mall kiosks.”
Interestingly enough, controversial organic food industry veteran Irwin Simon, was selected the chairman of Aphria the day before the bid came. Irwin was the previous Chairman and CEO of Hain Celestial Foods. This looks like it could be the forming of a massive company with roots right here in Columbus, Ohio. Stay tuned for more updates.
As a Columbus retailer that has coexisted with the Schottenstein family for over 46 years, we know to always take them and their retail skills seriously. In fact, Waterbeds n Stuff has been be voted #1 Smokeshop in Columbus Ohio for two years in row in both 2018 and 2017. Visit us online at waterbedsnstuff.com or come into one of our 13 retail locations in Columbus and Central Ohio.
**The beliefs and opinions expressed in this blog are not those of Waterbeds ‘n’ Stuff.