Full Press Release Details
BUSINESS ACQUISITION REPORT
Item 1 Identity of Company
Sundial Growers Inc. ( Sundial ) is a corporation existing under the Business Corporations Act (Alberta). The head
office of Sundial is located at Suite 300, 919 11 Avenue SW, Calgary, Alberta T2R 1P3.
The name of the executive officer of Sundial, who is knowledgeable about the significant acquisition and this Business Acquisition Report is
Jim Keough, the Chief Financial Officer of Sundial, and his business telephone number is (587) 602-1868.
Item 2 Details of Acquisition
On March 31, 2022, Sundial completed a plan of arrangement involving Alcanna Inc. ( Alcanna ) and the holders
( Alcanna Shareholders ) of common shares ( Alcanna Shares ) of Alcanna (the Alcanna Transaction ). Pursuant to the Alcanna Transaction, Sundial acquired all of the issued and outstanding Alcanna
Shares and the Alcanna Shareholders received, in exchange for each Alcanna Share held: (i) 8.85 common shares of Sundial (each whole share, a Sundial Share ); and (ii) $1.50 in cash. The Alcanna Transaction is described
in further detail in the management information circular and proxy statement of Alcanna dated November 9, 2021, as amended by the press release of Alcanna dated December 13, 2021 and the material change report of Alcanna dated
January 6, 2022 (collectively, the Circular ), each of which is available on Alcanna s issuer profile on SEDAR at www.sedar.com.
Alcanna is one of the largest private sector retailers of alcohol in North America, the largest in Canada by number of stores, and is located
in Edmonton, Alberta. The Alcanna Shares were listed and posted for trading on the Toronto Stock Exchange under the symbol CLIQ and were de-listed from the Toronto Stock Exchange as of the close of
trading on April 1, 2022. Additional information concerning Alcanna and its business and assets is included in the Circular and the section of the Circular titled Information Concerning Alcanna is incorporated by reference
into this Business Acquisition Report. The Circular is available on Alcanna s issuer profile on SEDAR at www.sedar.com.
Sundial issued an aggregate of 320,601,352 Sundial Shares and $54,339,214.50 in cash pursuant to the Alcanna Transaction as consideration for
the acquisition of all of the issued and outstanding Alcanna Shares. All cash paid by Sundial in connection with the Alcanna Transaction was paid out of Sundial s cash on hand.
The expected effect of the Alcanna Transaction on Sundial s financial position is outlined in the unaudited pro forma condensed
consolidated financial information of Sundial attached to this Business Acquisition Report as Schedule A .
ongoing integration of Alcanna s business and operations into those of Sundial, Sundial does not have any current plans or proposals for material changes to Sundial s business affairs or the affairs of the acquired operations which may
have a significant effect on the financial performance and financial position of Sundial.
Upon completion of the Alcanna Transaction,
Alcanna became a wholly owned subsidiary of Sundial. The business and operations of Alcanna have been combined with those of Sundial.
To the knowledge of Sundial, there has not been any valuation opinion obtained within the last twelve months by Alcanna or Sundial
required by securities legislation or a Canadian exchange or market to support the consideration paid by Sundial in connection with the Alcanna Transaction.
The Alcanna Transaction did not involve an informed person , associate or affiliate (as each term is
defined in Canadian securities legislation) of Sundial.
Statements and Other Information
The unaudited pro forma financial statements of Sundial, together with the notes thereto, are
attached to this Business Acquisition Report as Schedule A . Sundial s unaudited condensed consolidated interim financial statements as at and for the three months ended March 31, 2022 which are filed on SEDAR include the
financial position and results of Alcanna and its subsidiaries and are incorporated by reference into this Business Acquisition Report.
The audited consolidated financial statements of Alcanna as at and for the years ended December 31, 2021 and 2020, together with the
notes thereto and the auditor s report thereon, are attached hereto as Schedule B . The auditors of Alcanna do not consent to the use of their name or auditors report dated March 29, 2022, on the audited consolidated
financial statements of Alcanna for the years ended December 31, 2021 and 2020 in connection with this Business Acquisition Report.
The unaudited pro forma financial statements of Sundial attached hereto as Schedule A are not necessarily indicative of either the
results of operations that would have occurred in the year ended December 31, 2021 had the Alcanna Transaction been effective January 1, 2021 or the results of operations in future years. The actual adjustments may differ from those
reflected in such pro forma financial statements and such differences may be material.
Special Note Regarding Forward-Looking Statements
Certain statements contained in this Business Acquisition Report constitute forward-looking statements and forward-looking information
(collectively referred to herein as forward-looking statements ) within the
meaning of applicable Canadian securities laws. Such forward-looking statements relate to future events or future performance. All statements other than statements of historical fact may be
forward-looking statements. Such forward-looking statements are often, but not always, identified by the use of words such as seek , anticipate , budget , plan , continue , estimate ,
expect , forecast , may , will , project , predict , potential , targeting , intend , could , might , should ,
believe and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements.
Sundial believes the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this Business Acquisition
Report should not be unduly relied upon. These forward-looking statements speak only as of the date of this Business Acquisition Report.
In particular, this Business Acquisition Report contains forward-looking statements pertaining to the following:
The actual results, performance or achievements of Sundial could differ materially from those anticipated in these
forward-looking statements as a result of the risk factors set forth below and elsewhere in this Business Acquisition Report. These risks include, but are not limited to:
respect to forward-looking statements contained in this Business Acquisition Report, Sundial has made assumptions regarding, among other things: the fair value of assets acquired and liabilities assumed; deferred income tax impacts; timing and
determination of final allocations and values; depreciation and amortization recognized on assets acquired in the Alcanna Transaction; and attribution of amounts to assets acquired and liabilities assumed.
PRO FORMA FINANCIAL STATEMENTS OF SUNDIAL
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information is based upon the historical financial statements of Sundial
Growers Inc. ( Sundial ) after giving effect to the acquisition of Alcanna Inc. ( Alcanna ) (the Alcanna Transaction ).
As the Alcanna Transaction was completed on March 31, 2022, Sundial s unaudited condensed consolidated interim financial statements
as at and for the three months ended March 31, 2022 filed on Sedar include the financial position and one day of results of operations of Alcanna and its subsidiaries. Thus, no pro forma adjustments are required to give effect to the
acquisition of Alcanna and inclusion of an unaudited pro forma consolidated statement of financial position or an unaudited pro forma consolidated statement of loss and comprehensive loss as at and for the three months ended March 31, 2022 is
not required in the unaudited pro forma condensed consolidated financial information.
The unaudited pro forma consolidated statement of
loss and comprehensive loss for the year ended December 31, 2021 gives effect to the acquisition of Alcanna as if it had occurred on January 1, 2021.
The following unaudited pro forma condensed consolidated financial information and related notes present the historical financial information
of Sundial and Alcanna adjusted to give pro forma effect to events that are (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the consolidated results. The
unaudited pro forma condensed consolidated financial information should be read in conjunction with the:
The pro forma information presented is for illustrative purposes only and is not necessarily
indicative of the financial results of operations that would have been realized if the acquisition had been completed on the dates indicated, nor is it intended to project or be indicative of future operating results of the consolidated entity. The
pro forma adjustments are estimates based upon currently available information and certain assumptions that are believed to be reasonable under the circumstances. Future results of the consolidated entity may vary significantly from the results
reflected because of various factors. The final valuation may materially change the allocation of the purchase consideration, which could materially affect the fair values assigned to the assets acquired and liabilities assumed and could result in a
material change to the unaudited pro forma condensed consolidated financial information, including but not limited to the depreciation and amortization recognized on the assets acquired. Refer to footnotes to the unaudited pro forma condensed
consolidated financial information for more information on the basis of preparation.
Sundial Growers Inc.
Unaudited Pro Forma Consolidated Statement of Loss and Comprehensive Loss
Year Ended December 31, 2021
| (Amounts presented in $CAD thousands except per share amounts) | Historical Sundial Growers Inc. | Historical Alcanna Inc. | Pro forma adjustments | Note | Pro Forma Sundial Growers Inc. | |||||||||||||||
| Revenue | ||||||||||||||||||||
| Gross revenue | 67,279 | 726,272 | - | 793,551 | ||||||||||||||||
| Excise taxes | 11,151 | - | - | 11,151 | ||||||||||||||||
| Net revenue | 56,128 | 726,272 | - | 782,400 | ||||||||||||||||
| Cost of sales | 48,601 | 567,985 | (202) | (a2) | 616,384 | |||||||||||||||
| Inventory obsolescence | 16,978 | 202 | (a2) | 17,180 | ||||||||||||||||
| Gross margin before fair value adjustments | (9,451) | 158,287 | - | 148,836 | ||||||||||||||||
| Change in fair value of biological assets | 4,708 | - | - | 4,708 | ||||||||||||||||
| Change in fair value realized through inventory | (2,247) | - | - | (2,247) | ||||||||||||||||
| Gross margin | (6,990) | 158,287 | - | 151,297 | ||||||||||||||||
| Interest and fee revenue | 13,149 | - | - | 13,149 | ||||||||||||||||
| Investment loss | (44,501) | - | - | (44,501) | ||||||||||||||||
| Share of profit of equity accounted investees | 32,913 | - | - | 32,913 | ||||||||||||||||
| General and administrative | 38,370 | 32,757 | - | 71,127 | ||||||||||||||||
| Sales and marketing | 5,043 | 92,600 | - | 97,643 | ||||||||||||||||
| Research & development | 2,446 | - | - | 2,446 | ||||||||||||||||
| Depreciation and amortization | 4,726 | 33,773 | - | 38,499 | ||||||||||||||||
| Share based compensation | 12,307 | - | - | 12,307 | ||||||||||||||||
| Restructuring costs | 874 | - | - | 874 | ||||||||||||||||
| Asset impairment | 60,000 | - | - | 60,000 | ||||||||||||||||
| Provision for impairment of intangible assets | - | 2,453 | - | 2,453 | ||||||||||||||||
| Government subsidies | (2,180) | - | - | (2,180) | ||||||||||||||||
| Loss on cancellation of contracts | 5,116 | - | - | 5,116 | ||||||||||||||||
| (Loss) profit from operations | (132,131) | (3,296) | - | (135,427) | ||||||||||||||||
| Transaction costs | (17,566) | - | - | (17,566) | ||||||||||||||||
| Finance costs, net | (3,756) | (19,468) | - | (23,224) | ||||||||||||||||
| Change in estimate of fair value of derivative warrants | (77,834) | - | - | (77,834) | ||||||||||||||||
| Foreign exchange gain (loss) | 531 | (77) | - | 454 | ||||||||||||||||
| Gain on disposal of property, plant and equipment | 235 | - | - | 235 | ||||||||||||||||
| Net gain (loss) on fair value adjustments | - | 105 | - | 105 | ||||||||||||||||
| Other expenses | (1,932) | - | - | (1,932) | ||||||||||||||||
| Loss before tax | (232,453) | (22,736) | - | (255,189) | ||||||||||||||||
| Income tax recovery (expense) | - | (545) | - | (545) | ||||||||||||||||
| Deferred tax recovery (expense) | 2,271 | (4,779) | 4,779 | (a3) | 2,271) | |||||||||||||||
| Net (loss) earnings from continuing operations | (230,182) | (28,060) | 4,779 | (253,463) | ||||||||||||||||
| Net earnings from discontinued operations | - | 59,927 | - | 59,927 | ||||||||||||||||
| Net (loss) earnings for the period | (230,182) | 31,867 | 4,779 | (193,536) | ||||||||||||||||
| Equity-accounted investees share of OCI | 7,607 | - | - | 7,607 | ||||||||||||||||
| Comprehensive (loss) earnings | (222,575) | 31,867 | 4,779 | (185,929) | ||||||||||||||||
| Net (loss) earnings from continuing operations attributable to: | ||||||||||||||||||||
| Equity Shareholders | (230,382) | (21,351) | 4,779 | (246,954) | ||||||||||||||||
| Non-controlling interest | 200 | (6,709) | - | (6,509) | ||||||||||||||||
| (230,182) | (28,060) | 4,779 | (253,463) | |||||||||||||||||
| Net (loss) earnings attributable to: | ||||||||||||||||||||
| Equity Shareholders | (230,382) | 38,576 | 4,779 | (187,027) | ||||||||||||||||
| Non-controlling interest | 200 | (6,709) | - | (6,509) | ||||||||||||||||
| (230,182) | 31,867 | 4,779 | (193,536) | |||||||||||||||||
| Comprehensive (loss) earnings attributable to: | ||||||||||||||||||||
| Equity Shareholders | (222,775) | 38,576 | 4,779 | (179,420) | ||||||||||||||||
| Non-controlling interest | 200 | (6,709) | - | (6,509) | ||||||||||||||||
| (222,575) | 31,867 | 4,779 | (185,929) | |||||||||||||||||
| Basic and diluted loss per share from continuing operations | $ (0.12) | $ (0.11) | ||||||||||||||||||
| Basic and diluted loss per share | $ (0.12) | (b | ) | $ (0.09) |
See accompanying Notes to the Unaudited Pro Forma Consolidated Statement of Loss and Comprehensive Loss
Sundial Growers Inc.
Notes to Unaudited Pro Forma Consolidated Statement of Loss and Comprehensive Loss
| Alcanna net assets | $ thousands | |||
| Cash | 23,190 | |||
| Accounts receivable | 1,868 | |||
| Prepaid expenses and deposits | 10,986 | |||
| Inventory | 105,022 | |||
| Property, plant and equipment | 257,925 | |||
| Goodwill | 280,243 | |||
| Accounts payable and accrued liabilities | (36,703 | ) | ||
| Long-term debt | (10,000 | ) | ||
| Lease liabilities | (232,755 | ) | ||
| Derivative warrants | (58 | ) | ||
| Non-controlling interest | (58,250 | ) | ||
| Total purchase price | 341,468 |
| (Amounts presented in $CAD thousands except share and per share amounts) | Year ended December 31, 2021 | |||
| Historical Sundial basic and diluted weighted average shares outstanding | 1,860,380 | |||
| Number of shares issued in acquisition | 320,601 | |||
| Weighted average shares outstanding | 2,180,981 | |||
| Continuing operations | ||||
| Net loss attributable to Sundial Growers Inc. | (246,954) | |||
| Per share basic and diluted | (0.11) | |||
| Discontinued operations | ||||
| Net earnings attributable to Sundial Growers Inc. | 59,927 | |||
| Per share basic and diluted | 0.03 | |||
| Net loss attributable to Sundial Growers Inc. | (187,027) | |||
| Per share basic and diluted | (0.09) |
FINANCIAL STATEMENTS OF ALCANNA
CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
(Expressed in thousands of Canadian dollars)
Management s Responsibility for Financial Reporting
The preparation and presentation of the accompanying consolidated financial statements of Alcanna Inc. ( the Company ), which have
been prepared in accordance with International Financial Reporting Standards, are the responsibility of management and have been approved by the Board of Directors.
The consolidated financial statements include certain amounts that are based on the best estimates and judgments of management and in their
opinion present fairly, in all material respects, Alcanna Inc. s financial position, financial performance and cash flows. The Company s accounting procedures and related systems of internal controls are designed to provide reasonable
assurance that its assets are safeguarded and its financial information is reliable.
The consolidated financial statements have been
audited by PricewaterhouseCoopers LLP, the Company s external auditor. The external auditor is responsible for examining the consolidated financial statements and expressing its opinion on the fairness of the financial statements in accordance
with International Financial Reporting Standards. The auditor s report outlines the scope of its audit examination and states its opinion.
The Board of Directors, through the Audit Committee, is responsible for overseeing management s responsibility for financial reporting
and is ultimately responsible for reviewing and approving the consolidated financial statements. The Audit Committee meets regularly with management and the external auditor to satisfy itself that each group is discharging its responsibilities with
respect to internal controls and financial reporting. The Audit Committee reports its findings to the Board of Directors for their consideration when approving the consolidated financial statements for issuance to the shareholders. The external
auditor has full and open access to the Audit Committee, with and without the presence of management. The Audit Committee also considers, for review by the Board of Directors and approval by the shareholders, the engagement or re-appointment of the external auditor.
Independent auditor s report
To the Shareholders of Alcanna Inc.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of