Couche-Tard Makes Strategic Investment in Canadian Cannabis Retailer

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Fire & Flower

Couche-Tard Makes Strategic Investment in Canadian Cannabis Retailer

07/24/2019
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LAVAL, Quebec — Alimentation Couche-Tard Inc. will make a strategic investment in Fire & Flower Holdings Corp., an independent cannabis retailer.

Based in Edmonton, Alberta, Fire & Flower Holdings Corp. operates or licenses 23 cannabis retail stores in Alberta, Saskatchewan and Ontario; a wholesale distribution division in Saskatchewan; and the HiFyre digital retail platform, which connects consumers to the world of cannabis.

The investment will provide Fire & Flower with additional capital to further accelerate their expansion strategy. The cannabis company's strong leadership team and years of balanced experience in the cannabis and retail sectors have allowed it to demonstrate the capability of rapidly scaling its retail network through a best-in-class store concept, their proprietary HiFyre platform, and a focus on the safe, responsible and lawful sale of cannabis, according to Couche-Tard.

"Couche-Tard is excited to make this strategic investment in one of the fastest growing cannabis 'pure-play' retailers," said Brian Hannasch, President and CEO of CoucheTard. "This investment in Fire & Flower, with a path to a controlling stake, will enable us to leverage their leadership, network and advanced digital platform to accelerate our journey in this new and flourishing sector."

Key points of the deal include:

  • Couche-Tard will invest $25,989,985.42 in the form of unsecured convertible debentures to obtain a 9.9 percent ownership interest in Fire & Flower upon conversion;
  • Couche-Tard will concurrently receive three series of share purchase warrants, which, if exercised in full, would subsequently increase Couche-Tard's ownership interest to 50.1 percent on a fully diluted basis (assuming the conversion in full of the debentures);
  • At closing, Couche-Tard will immediately be granted nomination rights to the board of Fire & Flower, which will escalate commensurate with the exercise of the warrants and the increase in Couche-Tard's ownership position; and
  • In connection with the transaction, Couche-Tard will be granted participation and top-up rights in order to maintain its equity ownership percentage going forward as well as certain customary registration rights.

"This strategic investment by Couche-Tard, one of the world's largest retailers, is transformative for Fire & Flower," said Fire & Flower CEO Trevor Fencott. "The support of Couche-Tard's world-class leadership team, coupled with their capital strength and impressive international footprint, provides us with outstanding opportunities for aggressive growth."

The deal is subject to customary closing conditions and applicable regulatory approvals, including approval by Fire & Flower shareholders. Its board of directors is unanimously recommending that shareholders vote in favor of it.

Couche-Tard, based in Laval, Quebec, is the leader in the Canadian convenience store industry. As of April 28, Couche-Tard's network in North America comprised 9,866 convenience stores, including 8,629 stores with fuel. Its North American network consists of 19 business units, including 15 in the United States covering 48 states and four in Canada covering all 10 provinces. In addition, through CrossAmerica Partners LP, Couche-Tard supplies road transportation fuel under various brands to approximately 1,300 locations in the U.S.