YourWay Cannabis Brands Inc. (CSE: YOUR) (OTC: YOURF) (FSE: HOB) (“YourWay“) and Ionic Brands Corp. (CSE: IONC) (OTC: IONKF) (FSE: IB3) (“Ionic Brands“) are pleased to announce that they have entered into a definitive arrangement agreement (the “Arrangement Agreement“) on April 20, 2022 pursuant to which YourWay will acquire all of Ionic Brands’ issued and outstanding common shares (the “Ionic Brands Shares“), including all Ionic Brands’ Shares issuable on conversion of Ionic Brands’ issued and outstanding preferred shares in accordance with the terms thereof (the “Transaction“).
Pursuant to the terms of the Arrangement Agreement, Ionic Brands shareholders will receive 0.0525 of a YourWay common share in exchange for each Ionic Brands Share held. The Transaction provides Ionic Brands shareholders with a premium per Ionic Share of approximately 21% based on the closing price of the YourWay common shares on the Canadian Securities Exchange (the “CSE“) as of April 19, 2022 and the 10-day volume weighted average price of the Ionic Brands Shares on the CSE for the period between April 6, 2022 and April 19, 2022.
The arm’s length Transaction is expected to provide several benefits to both YourWay and Ionic Brands shareholders. Notably, following completion of the Transaction, YourWay will possess a strengthened brand portfolio including one of Washington’s leading brands, which is expected to enable broader market penetration.Key Transaction Highlights
- Anticipated Growth Opportunities: The Transaction enables potential expansion of YourWay’s ‘House of Brands’ into two additional leading cannabis markets: Washington and Oregon, while also exposing YourWay to an additional 16 million consumers.
- Increased Retail Footprint: The combined company’s products are expected to be carried by more than 450 retailers, with significant market penetration in Arizona and Washington. In 2021, Ionic Brands distributed over 6,970,889 million packaged products.
- Robust Brand Portfolio: Following the Transaction, the combined company will have 12 owned brands brands in four key states, with expanded consumer offerings and exposure to high growth categories, including edibles, beverages, and packaged flower. Ionic Brands’ flagship brand, IONIC, is a top three premium brand in Washington State with a series of vape and prerolls SKUs. Ionic Brands’ portfolio also includes; ZOOTS, a popular consumables brand with a variety of form factors, the value concentrate brands DABULOUS, WICKED, a premium infused preroll and Cowlitz County Cannabis which includes seven packaged flower and preroll brands.
- Product Innovation: The combined company will have nearly a decade of data, formulation, and product development experience, enabling the development of products that closely align with consumer preferences.
- Bolsters Leadership Team: The management team of the combined company will have more than 70 years of combined cannabis industry experience to support the company’s ongoing growth.
- Ongoing Upside Potential for Ionic Brands Shareholders: Ionic Brands shareholders will receive YourWay common shares pursuant to the Transaction and will have the opportunity to participate in the future growth of YourWay.
- Immediate Attractive Premium for Ionic Brands Shareholders: The Transaction provides Ionic Brands shareholders with a premium per Ionic Share of approximately 21% based on the closing price of the YourWay common shares on the CSE as of April 19, 2022 and the 10-day volume weighted average price of the Ionic Brands Shares on the CSE for the period between April 6, 2022 and April 19, 2022.
- Opportunity to Achieve Potential Cost Synergies: YourWay and Ionic Brands anticipate post-Transaction cost synergy opportunities as the combined company optimizes and integrates operations and shared services.
- Improved Financial Position: Considering the challenging economic environment and volatile financial market conditions, particularly for cannabis companies, the Transaction provides Ionic Brands shareholders with access to YourWay’s stronger financial position, which is expected to enable the combined company to pursue key growth projects.
Management Commentary
“The Transaction is expected to accelerate YourWay’s ‘House of Brands’ strategy and represents an opportunity for entry into key markets with limited competition from national multi-state operators. Ionic Brands brings complementary strength to our existing business, providing the ability to bring more innovative products to consumers and bolstering our footprint in two new US markets.”
– Jakob Ripshtein, Executive Chairman of the Board, YourWay Cannabis Brands Inc.
“We believe the Transaction is highly strategic for Ionic Brands, its brands, team members and shareholders, and will allow Ionic Brands shareholders to participate in the shared vision of the combined company. The Transaction was entered into with a view to the long-term growth and success of the Ionic brand and the potential to increase shareholder value.”
– John Gorst, CEO, Ionic Brands Corp.Transaction Details
The Transaction will be effected by way of a court-approved plan of arrangement under the Business Corporations Act(British Columbia) and will require the approval of: (i) 66⅔% of the votes cast by the holders of Ionic Brands Shares and the Series D preferred shares of Ionic Brands, voting together as a single class, on the Transaction, (ii) a simple majority of the votes cast by the holders of Ionic Brands Shares and the Series D preferred shares of Ionic Brands, voting as a single class after excluding any votes of “related parties” and “interested parties” and other persons required to be excluded under Canadian Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions, on the Transaction, (iii) 66⅔% of the votes cast by the holders of the Series D preferred shares of Ionic Brands on an amendment to the articles of Ionic in order to remove the dividend entitlement for the holders of the Series D preferred shares (the “Series D Amendment“), and (iv) 66⅔% of the votes cast by the holders of the Series E preferred shares of Ionic Brands on an amendment to the articles of Ionic in order to remove the dividend entitlement for the holders of the Series E preferred shares (the “Series E Amendment“), all at a special meeting to consider the Transaction expected to take place in June 2022.
YourWay has entered into voting support agreements with certain of Ionic Brands’ directors, officers and significant shareholders, together holding (i) at least 21.66% of the outstanding Ionic Brands Shares and Series D preferred shares of Ionic Brands, (ii) approximately 70.57% of the outstanding Series D preferred shares of Ionic Brands, and (iii) 100% of the outstanding Series E preferred shares of Ionic Brands, pursuant to which they have agreed, among other things, to vote their shares in favour of the Transaction, the Series D Amendment and the Series E Amendment, as applicable.
In addition to shareholder and court approvals, the Transaction is subject to applicable regulatory approvals including, but not limited to, CSE approval and the satisfaction of certain other closing conditions, including the Series D Amendment, the Series E Amendment and various amendments to the terms of Ionic Brands outstanding convertible debentures. The Arrangement Agreement includes customary provisions, including non-solicitation, “fiduciary out” and “right to match” provisions as well as a termination fee payable by Ionic Brands to YourWay in certain specified circumstances.
Assuming timely receipt of all necessary court, shareholder, regulatory and other third-party approvals and the satisfaction of all other conditions, closing of the Transaction is expected to occur in the third quarter of 2022.
A full description of the Transaction will be set forth in the management information circular of Ionic Brands, which will be mailed to Ionic Brands shareholders and filed with the Canadian securities regulators on the System for Electronic Document Analysis and Retrieval (“SEDAR“) at www.sedar.com.Approvals and Recommendation
The Transaction was approved by the Board of Directors of each of YourWay and Ionic Brands, and the Ionic Brands Board of Directors unanimously recommends that Ionic Brands shareholders vote in favour of the Transaction.
LUI, Inc. provided the Ionic Brands Board of Directors with an opinion, dated April 19, 2022, to the effect that, as of the date of such opinion, the consideration payable pursuant to the Transaction is fair, from a financial point of view, to the Ionic Brands shareholders, in each case, based upon and subject to the respective assumptions, limitations, qualifications and other matters set forth in such opinions.
None of the securities to be issued pursuant to the Transaction have been or will be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act“), or any state securities laws, and any securities issuable in the Transaction are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the U.S. Securities Act and applicable exemptions under state securities laws. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities.
