TORONTO - RIV Capital Inc. (“RIV Capital” or the “Company”) (TSX: RIV) (OTC: CNPOF), an acquisition and investment company specializing in cannabis, has entered into definitive agreements with The Hawthorne Collective, a newly-formed cannabis-focused subsidiary of The Scotts Miracle-Gro Company (“ScottsMiracle-Gro”) (NYSE: SMG) for the purchase of a US$150 million unsecured convertible note from RIV Capital (the “Investment”). The Investment establishes RIV Capital as The Hawthorne Collective’s preferred vehicle for investments not currently under the purview of The Hawthorne Gardening Company. RIV Capital’s strategy remains the same as its previously disclosed plans to acquire, invest in, launch, and/or develop U.S. assets to build a multistate cannabis operating and brand platform.
“As we approach the launch of our U.S. platform, we are excited to announce the strategic investment from The Hawthorne Collective, a subsidiary of one of the largest and most successful companies serving both the CPG and cannabis sectors,” said Narbé Alexandrian, President and CEO, RIV Capital. “The Investment opens opportunities for considerable value creation and growth for RIV Capital, including potential access to additional capital that will accelerate our platform’s growth. With ScottsMiracle-Gro’s strong track record, reputation, and brand awareness, we can build upon lessons learned in both the Canadian and U.S. cannabis markets, and leverage their insights to optimize our acquisition and investment strategy.”
With over six years of experience as a key ancillary provider in the U.S. cannabis industry via its subsidiary, The Hawthorne Gardening Company, North America’s leader in indoor and hydroponic growing supplies, ScottsMiracle-Gro has significant knowledge and expertise in the U.S. cannabis sector. Since its inception, The Hawthorne Gardening Company has grown into one of the largest cannabis-focused companies in the world on a revenue basis, and has cultivated relationships with operators, brands, and ancillary providers. Now, through the Investment, the newly-formed The Hawthorne Collective is injecting significant capital into the Company, to be used for general corporate and lawful purposes, that will unlock potential access to capital which will accelerate the launch and expansion of its U.S. cannabis operating and brand platform.
“While the Investment adds further capital to our balance sheet, our strategy remains the same,” added Alexandrian. “We have an extensive deal pipeline with some near-term prospects, and we will continue to focus our efforts on those prospects that we believe will contribute to building a leading multistate operator and brand platform in the U.S. market.”
“The addition of The Hawthorne Collective into our portfolio allows us to explore and pursue new opportunities in an industry that is poised for significant growth in the years ahead,” said Jim Hagedorn, Chairman and CEO, ScottsMiracle-Gro. "We are confident in our partners at RIV Capital and that our long-term approach ultimately will drive meaningful value for our shareholders."
With approximately CA$400 million in available capital1, and taking into account certain restrictions relating to the funds contributed pursuant to the Investment, RIV Capital plans to acquire, invest in, launch, and/or develop U.S. operators and brands across financially and strategically attractive states to create a multistate platform. The Company has potential near-term prospects and is engaged in discussions regarding one or more transactions that would kick-start its U.S. strategy. The Company then plans to continue building out its platform, with a focus on acquisitions of and investments in brands, other companies along the value chain, and operators in limited license states and other states of particular strategic interest. The Company anticipates that the Investment will provide additional resources and flexibility to accelerate its go-forward strategy by pursuing parallel opportunities or acquisition targets.
On closing of the Investment, RIV Capital will also expand its Board of Directors (the “Board”) to seven seats and add three ScottsMiracle-Gro nominees alongside the existing RIV Capital directors. These nominees are:
“We look forward to welcoming the appointed nominees to the Board,” said Asha Daniere, Chair of the Board. “Expanding the Board will introduce new insights and experience to RIV Capital, and bolster our governance as we launch into a rapidly evolving market. Moving forward, we believe that the breadth of expertise brought by Mr. Hagedorn, Mr. Sims, and Mr. Vaynerchuk will be integral to progressing the Company’s strategy.”
Upon the completion of the Investment, RIV Capital will:
There are a number of terms and conditions relating to the Investment, including, but not limited to, the following:
The Investment has not been and will not be registered under the U.S. Securities Act of 1933, as amended or qualified by a prospectus in Canada. This news release is neither an offer to sell nor the solicitation of an offer to buy the note or any other securities and shall not constitute an offer to sell or solicitation of an offer to buy, or a sale of, the note or any other securities in any jurisdiction in which such offer, solicitation or sale is unlawful.
In connection with its review and evaluation of the Investment, the Company engaged INFOR Financial Inc. (“INFOR Financial”) to provide a fairness opinion related to the Investment. The Company received the fairness opinion from INFOR Financial which concluded that, subject to the scope of review, assumptions, limitations, and qualifications set forth therein, as of August 9, 2021, the Investment is fair, from a financial point of view, to the Company.
Any investments or acquisitions in the U.S. cannabis market may be inconsistent with the rules and policies of the Toronto Stock Exchange (the "TSX"). The completion of the Investment is conditional on the Company’s ability to delist its common shares from the TSX and list its common shares on the Canadian Securities Exchange (the “CSE”), which it intends to complete prior to the closing of the Investment in order to compliantly execute its go-forward corporate strategy.
Accordingly, the Company has submitted an application to voluntarily delist its common shares from the TSX and has applied for listing on the CSE. The Company expects the common shares to be delisted from the TSX at the close of market on August 24, 2021, and for trading on the CSE under the symbol “RIV” to commence on August 24, 2021.
The Company announces that it has terminated the services of TSX Trust Company as transfer agent and registrar effective as of July 22, 2021. The Company has engaged Odyssey Trust Company (“Odyssey”) to provide such services moving forward. Odyssey was selected based on its knowledge of the challenges and opportunities present in the cannabis market. Shareholders need not take action in respect of the change in transfer agent.
All inquiries and correspondence relating to the shareholder records, transfer of shares, lost certificates and or change of address should be directed to Odyssey as follows:
Odyssey Trust Company
702 – 67 Yonge Street
Toronto, ON M5E 1J8
Toll Free: 1-888-290-1175
1Based on exchange rates as of August 9, 2021.
2Assumes the Note does not convert prior to the maturity date.
RIV Capital is an investment and acquisition company specializing in cannabis with a portfolio of 13 companies across various segments of the cannabis value chain. We believe that bringing together people, capital, and ideas raises the potential of the entire cannabis industry. By leveraging our industry insights, in-house expertise, and thesis-driven approach to investing, we aim to provide shareholders with exposure to specialized and disruptive cannabis companies.
With approximately $4.1 billion in sales, the Company is one of the world’s largest marketers of branded consumer products for lawn and garden care. The Company’s brands are among the most recognized in the industry. The Company’s Scotts®, Miracle-Gro® and Ortho® brands are market-leading in their categories. The Company’s wholly-owned subsidiary, The Hawthorne Gardening Company, is a leading provider of nutrients, lighting and other materials used in the indoor and hydroponic growing segment. Another wholly-owned subsidiary, The Hawthorne Collective, has been established to invest in emerging areas of the cannabis industry. For additional information, visit us at www.scottsmiraclegro.com.
This news release contains statements which constitute “forward-looking information” within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to future business activities and operating performance. Forward-looking information is often identified by the words “may”, “would”, “could”, “should”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect” or similar expressions and includes, but is not limited to, information and statements regarding: whether and when the Investment will be consummated; the anticipated benefits of the Investment and the strategic investment by The Hawthorne Collective; the Company's intention to invest in, acquire and/or merge with operating U.S. cannabis companies and the value to be derived therefrom; the Company's expectation that the Investment will accelerate growth, provide the Company with additional access to capital and optimize its investment and acquisition strategy; the Company’s expectation that it will be ScottsMiracle-Gro’s preferred vehicle for investments not currently under the purview of The Hawthorne Gardening Company; the anticipated proceeds from the Investment net of transaction costs; the Company’s intention to de-list from the TSX prior to the completion of the Investment and list its securities on the CSE; the Company obtaining and/or satisfying customary approvals and conditions; and expectations for other economic, business, and/or competitive factors.
Investors are cautioned that forward-looking information is not based on historical fact but instead reflects management’s expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. Although the Company believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the Company. Our actual financial position and results of operations may differ materially from management’s current expectations.
Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the parties' ability to consummate the Investment; the ability of the parties to satisfy, in a timely manner, all conditions to the closing of the Investment; the ability of the parties to obtain, in a timely manner and on satisfactory terms, all necessary regulatory approvals required for conversion of the Note; assumptions regarding the conversion of the Note; the timing of any changes to federal laws in the United States to allow for the general cultivation, distribution, and possession of cannabis; assumptions regarding The Hawthorne Collective’s top-up option; the potential impact of the announcement or consummation of the Investment on relationships, including with regulatory bodies, stock exchanges, lenders, employees and competitors; the diversion of management time on the Investment; assumptions concerning the Investment and the operations and capital expenditure plans of the Company following completion of the Investment; assumptions concerning the Company’s ability to execute its go-forward strategy; credit, liquidity and additional financing risks for the Company and its investees; stock market volatility; regulatory and licensing risks; changes in cannabis industry growth and trends; changes in the business activities, focus and plans of the Company and its investees and the timing associated therewith; the Company's actual financial results and ability to manage its cash resources; changes in general economic, business and political conditions, including challenging global financial conditions and the impact of the novel coronavirus pandemic; competition risks; potential conflicts of interest; the regulatory landscape and enforcement related to cannabis, including political risks and risks relating to regulatory change; changes in applicable laws; changes in the global sentiment towards, and public opinion of, the cannabis industry; divestiture risks; and the other risk factors more fully described in the Company’s annual information form for the year ended March 31, 2021 filed with the Canadian securities regulators and available on the Company’s profile on SEDAR at www.sedar.com.
Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors that could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company does not intend, and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.
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