SNDL Inc. announced on August 13 that it will acquire all of Nova Cannabis’s issued and outstanding common shares for approximately $40 million.
SNDL and Nova Cannabis had previously announced the termination of their implementation agreement from December 20, 2022, which would have, in part, seen SNDL vending into Nova’s retail network under the Value Buds, Spiritleaf, and Superette banners located in Ontario and Alberta.
The plan had been repeatedly delayed due to what it said was continued review by an unnamed provincial regulator.
The new acquisition secures SNDL’s control of the remaining approximately 34.8% of shares in Nova Cannabis, giving it 100% ownership of the retail chain. SNDL also manages several investments, which include Canadian cannabis companies like Indiva, Delta 9, and Nova Cannabis, along with several US cannabis companies.
“Today’s announcement by our Alberta-based corporations underscores our commitment to sustainable performance in Canadian cannabis,” said Zach George, SNDL’s Chief Executive Officer. “We are committed to building a consumer-centric model at scale, supported by SNDL’s robust shared service model, access to capital, and a well-developed cannabis retail pipeline. These factors are integral to the achievement of sustained profitable growth.”
Nova reported record revenue in their most recent quarterly report covering the three months ended June 30, 2024.
The company reported a record of $69.2 million in revenue for the three months ended June 30, 2024, the company’s second quarter of 2024. This translated to $16.8 million in gross profits and $859,000 in net and comprehensive earnings, up from a $333,000 loss in the previous quarter.
Nova’s revenue had declined in the past three quarters from a peak of $67.7 million in Q3 2023 to $67.4 million in Q4 2023 and $64.3 million in Q1 2024.
Nova announced it had opened its one hundredth Value Buds store on June 30, 2024. As of August 1, 2024, the company owned and/or operated 100 stores in Alberta, Saskatchewan, British Columbia, and Ontario.
The Alcohol and Gaming Commission of Ontario (AGCO) has rules preventing cannabis producers like SNDL from directly or indirectly owning or controlling more than a 25% interest in any licensed Ontario cannabis retailer.
However, following SNDL’s initial acquisition of Nova’s then-parent company, Alcanna Inc., in 2022, the companies created a special agreement for the sale of retail stores located in Ontario to a separate company called Spirit Leaf Ontario Inc. As of August 2024, the company has 35 locations in Ontario.
There are also 36 Value Buds locations in Ontario as of publication.
In response to a request fro comment, the AGCO told StratCann via email that the agency is aware of the recent announcement made by SNDL.
“The regulator carefully scrutinizes all transactions involving cannabis retail licensees to assess their eligibility under the Cannabis Licence Act,” writes a media representative with the agency. “That process is currently active and so we can offer no further comment at this time.”
Note: This article has been updated to include comments from the AGCO.
