December 30, 2020 (ACCESSWIRE via COMTEX) -- Combined Company will be a fully-integrated global leader in adult-use recreational and medical cannabis markets and the only MCO operating directly in Israel, the EU, and Canada, with forecast adjusted EBITDA profitability in 2021IMC will leverage Trichome's premium indoor cultivation to meet growing demand for premium cannabis from IMC's established international distribution platformThe acquisition of Trichome lays the foundation for IMC's North American growth strategy, with the Trichome team bringing extensive experience in acquisitions, restructurings and operations to capitalize on consolidating a targeted list of attractively valued and highly synergistic assetsOren Schuster will remain CEO of the Combined Company; Michael Ruscetta and Howard Steinberg to lead the Combined Company's North American operations; Marc Lustig appointed Executive Chairman of IMC; planned NASDAQ listing of IMC expected in Q1 2021IMC Board and the independent members of the Trichome Board unanimously recommend the Transaction; the directors and officers of Trichome and two of its largest shareholders, Cresco Labs and Opaskawayak Cree Nation, comprising approximately 34% ownership, have entered voting support agreements
TORONTO, ON and GLIL YAM, ISRAEL / ACCESSWIRE / December 30, 2020 / IM Cannabis Corp. (the "Company" or "IMC") /zigman2/quotes/214998344/delayed CA:IMCC -9.51% , a multi-country operator ("MCO") in the medical cannabis sector with operations in Israel and across Europe, and Trichome Financial Corp. ("Trichome") /zigman2/quotes/215562621/delayed CA:TFC -8.40% , are pleased to announce that they have entered into a definitive agreement (the "Arrangement Agreement") to combine their businesses into a global leader in adult-use recreational and medical cannabis (together, the "Combined Company") pursuant to a plan of arrangement to be completed under the Business Corporations Act (Ontario) (the "Transaction"). Following completion of the Transaction, the Combined Company will maintain offices in Glil Yam, Israel and Toronto, Canada, and will operate under the IM Cannabis Corp. corporate name with common shares trading on the Canadian Securities Exchange under the ticker symbol "IMCC." The Company remains on track to finalize its listing on the NASDAQ Capital Market in Q1 2021.
The Combined Company is expected to be a global cannabis production and distribution leader with increasing revenue in Israel and Germany's medical cannabis markets under the IMC brand, and in Canada's adult-use recreational market through Trichome's wholly-owned subsidiary, Trichome JWC Acquisition Corp. d/b/a JWC ("JWC"). The Combined Company is anticipated to benefit from each team's cross-functional brand-building and distribution expertise, which is expected to enable the Combined Company to immediately begin planning for a roll-out of JWC products in Israel and the EU. Both management teams share a prudent operating philosophy that is grounded in finding low capital, high return projects, and a focus on free cash flow generation. Strategically, there is a common goal of continuing an aggressive, synergistic and accretive acquisition strategy in North America. With continued revenue growth in all operating regions expected throughout 2021 and by maintaining a disciplined and lean cost structure, the Combined Company is forecast to be adjusted EBITDA positive in 2021.
Under the terms of the Transaction, the shareholders of Trichome will receive 0.981 common shares of IMC for each common share of Trichome (the "Consideration"). The Consideration was based on previously negotiated values at the time of signing the non-binding letter of intent between both parties. Based on the 30-day volume-weighted average price ("VWAP") of IMC common shares prior to this announcement, the implied Trichome share price of $2.05 pursuant to the exchange ratio implies a 37% premium to the 30-day VWAP of Trichome common shares prior to this announcement. Upon the completion of the Transaction, IMC shareholders will own approximately 82% of the Combined Company and Trichome shareholders will own 18%.
"This is a transformational acquisition for IMC whereby we will truly become a global cannabis company. The acquisition of Trichome provides IMC with a secure source of premium supply to meet the large and growing international demand for IMC-branded cannabis products. Furthermore, the Transaction is expected to further strengthen our balance sheet and add a highly talented team that has done an exceptional job at restructuring JWC into an efficient operator with a curated slate of products for the Canadian adult-use recreational market, which can be further leveraged as a platform for targeted North American consolidation," said Oren Shuster, CEO of IMC.
Marc Lustig has transitioned from Non-Executive Chairman to Executive Chairman of IMC.
"The combination of IMC and Trichome will establish a true Multi-Country Operator just as international cannabis markets are opening up and expanding rapidly," said Mr. Lustig. "As a Co-founder of Trichome and the Chairman of both Trichome and IMC, I expect this combination to create a dominant player in international cannabis markets that will generate significant value for shareholders."
Michael Ruscetta and Howard Steinberg will lead the Combined Company's North American operation and will continue to develop opportunities for further consolidation of the North American cannabis sector.
Michael Ruscetta, CEO of Trichome added, "Combining with IMC is an exciting opportunity for everyone at Trichome. As part of a global platform, we now have access to a broader distribution network for JWC's suite of premium cannabis products in key international markets. The combination of IMC and Trichome also results in a unique platform with a strong balance sheet and access to capital to execute on future consolidation opportunities. Ultimately, this transaction paves the way for even greater profitability at JWC and the Combined Company."
Howard Steinberg, CEO of JWC commented, "The combination with IMC would not be possible were it not for the amazing efforts the teams on the ground have made to optimize production, reposition the JWC brand and structure our operation for sustainable profitability over the last nine months. With an accomplished partner in IMC, we now move forward together embracing the values and culture in place to further accelerate our journey."
Strategic and Financial Highlights
The Transaction provides operational and financial benefits to both organizations, while creating one of the industry's leading global cannabis platforms. Highlights include:
Multi-Country Operator Platform: The Combined Company will be the only MCO with established direct operations in Israel, the EU and Canada. Its portfolio of brands includes the IMC brand of medical cannabis products and JWC's dry flower, pre-roll, hash and kief adult-use products.
Enhanced profitability leveraging combined production and distribution capabilities: JWC's premium indoor cultivation facility in Canada is intended to be leveraged to export through IMC's established distribution network, maximizing asset utilization and profitability. With the medical cannabis market in Israel continuing to grow and supported by the potential tailwind of legalization, the launch of sales in Germany and now increased international demand for products from the JWC operation, the Combined Company is forecast to be adjusted EBITDA positive in 2021.
Increased scale to drive opportunistic consolidation: Based on Trichome's proven consolidation strategy and experienced team, the Combined Company sees a significant opportunity to use JWC as a base for opportunistic and accretive consolidation in North America.
International team of experienced operators: With expertise in the Israeli and German medical cannabis markets firmly established, the Transaction adds a talented team of operators in North America that have proven abilities in cultivation, sales, marketing, restructuring and mergers and acquisitions.
Access to and cost of capital: With IMC's NASDAQ Capital Market listing on track for Q1 2021, the Combined Company is positioned to continue optimizing its cost of capital.
The Transaction, which is to be carried out by way of a court-approved plan of arrangement under the Business Corporations Act (Ontario), will require the approval of: (i) two-thirds of the votes cast by shareholders of Trichome; (ii) a majority of the aggregate principal amount of outstanding Trichome convertible debentures; and (iii) 50%+1 of the Trichome shareholders, excluding Marc Lustig and Michael Ruscetta in accordance with Multilateral Instrument 61-101, in each case at special meetings expected to take place in Q1 2021 (the "Meetings"). Trichome's directors and officers, Cresco Labs Inc. /zigman2/quotes/205276242/delayed CA:CL -4.07% , and Opaskawayak Cree Nation, which currently hold approximately 34% of the outstanding common shares of Trichome, have each entered into voting support agreements to vote their shares in favour of the Transaction and lock-up agreements restricting the resale of IMC common shares to be owned by such individuals upon closing of the Transaction to a staggered 1/6 release per month of such shares for a period of 6 months. Certain Trichome convertible debenture holders representing approximately 75% of the outstanding principal amount of such Trichome convertible debentures have also entered into voting support agreements in favour of the Transaction.
Completion of the Transaction will also be subject to court and regulatory approvals, which are currently expected to be received in the first half of 2021.
The Arrangement Agreement contains certain customary provisions, including covenants in respect of non-solicitation of alternative acquisition proposals for Trichome, a right to match any superior proposals for Trichome and a termination fee of $3.5 million payable to IMC in certain circumstances.
Further details with respect to the Transaction will be included in the information circular to be mailed to Trichome shareholders in connection with the Meeting. A copy of the Arrangement Agreement and the information circular will be filed on Trichome's SEDAR profile and will be available for viewing at www.sedar.com .
Recommendation of Trichome Board
The Board of Directors of Trichome formed a special committee of independent members (the "Trichome Special Committee") to review and approve the Transaction. Desjardins Capital Markets provided a fairness opinion to the Trichome Special Committee on December 29, 2020 ("Opinion") stating that, as of the date of such Opinion and subject to the assumptions, limitations and qualifications contained in such Opinion, the Consideration to be received by shareholders of Trichome pursuant to the Transaction is fair, from a financial point of view, to the shareholders of Trichome. Based on the Opinion and after consulting with its financial and legal advisors, among other considerations, the independent members of the Board of Directors of Trichome have unanimously: (i) determined that the Transaction is in the best interests of Trichome; (ii) resolved to recommend that Trichome shareholders vote in favor of the Transaction; and (iii) determined that the Consideration to be received by Trichome shareholders pursuant to the Transaction is fair from a financial point of view to Trichome shareholders.
Cormark Securities Inc. is acting as financial advisor and Gowling WLG (Canada) LLP is acting as legal counsel to IMC. McMillan LLP is acting as legal counsel to Cormark Securities. Desjardins Capital Markets is acting as financial advisor and Torys LLP is acting as legal counsel to Trichome. Dentons Canada LLP is acting as legal counsel to Desjardins Capital Markets.
About IM Cannabis Corp.
IMC is an MCO in the medical cannabis sector headquartered in Israel and with operations across Europe. Over the past decade, IMC has built its brand as a provider of premium medical cannabis products in the Israeli market. The Company has also expanded its business to offer intellectual property related services to the medical cannabis industry.
In Europe, IMC operates through a German-based subsidiary and EU-GMP certified medical cannabis distributor - Adjupharm GmbH. IMC's European presence is also augmented by strategic alliances with various pan-European EU-GMP cultivators and distributors with the objective of capitalizing on the increased demand for medical cannabis products in Europe and bringing the IMC brand and its product portfolio to European patients.
IMC partners with renowned academic institutions and scientists, as well as allocates resources and investments for the development of innovative technologies in order to improve the lives of medical cannabis users around the world.
About Trichome Financial Corp.
Trichome is a specialty finance company focused on providing flexible and creative capital solutions to the global legal cannabis market. Trichome was created to address the lack of credit availability in the large, growing and increasingly complex cannabis market. Trichome's experienced founders and management team have a unique edge to capitalize on proprietary deal flow and industry insight in order to drive the best risk-adjusted returns on shareholder's capital. With the recent acquisition of the assets of James E. Wagner Cultivation Corp., Trichome is focused on acquiring related assets to compliment JWC and leverage the knowledge, expertise and insights of its employees, management and founders.