CALGARY,
AB, May 2, 2024 /PRNewswire/ - SNDL Inc.
(Nasdaq: SNDL) ("SNDL"), through its joint venture in
SunStream Bancorp Inc. ("SunStream Bancorp"), today
announced the SunStream USA group
of companies (collectively, "SunStream USA Group") intends to proceed with the
acquisition of equity positions in U.S. cannabis assets. This
follows the completion of a review by SNDL's listing authority,
Nasdaq. SNDL has been in regular and active dialogue with
Nasdaq, in respect of structuring and governance related to the
SunStream USA Group. Based on
SNDL's opinion of counsel and Nasdaq's review, SNDL is satisfied
that the SunStream USA Group
structure conforms to applicable laws and is not aware of any
reason that would cause SNDL to not be compliant with Nasdaq
listing rules ("Regulatory Compliance"). All financial
information in this press release is reported in U.S. dollars
unless otherwise indicated.
SunStream USA I, LLC ("SSU
I") and SunStream USA II, LLC
("SSU II", and with SSU I, "SunStream USA") are among the entities today that
comprise the SunStream USA Group.
Each entity includes one or more third-party investors, which are
independently managed and governed. SNDL's affiliate, SunStream
Opportunities II LP, is anticipated to own non-voting and
non-participating exchangeable securities in the SunStream
USA entities ("SSU Exchangeable
Securities"). SNDL will not consolidate the financial
statements of any entity within the SunStream USA Group until such time it is permissible to
do so under applicable law and listing regulations. SNDL, as a
capital sponsor of the SunStream USA Group and through SunStream Opportunities
II LP, would be afforded prospective economic interests in
SunStream USA, through the SSU
Exchangeable Securities.
With SNDL having satisfied itself on Regulatory Compliance
matters, SunStream USA is now
braced to acquire certain non-performing credit investments from
SunStream Opportunities LP (an affiliate of SunStream Bancorp),
resulting in majority equity positions in select assets of Surterra
Holdings, Inc. (d/b/a Parallel) and Greenpeak Industries Inc.
(d/b/a Skymint). Skymint operates in the state of Michigan, while Parallel is a multi-state
cannabis operator ("MSO"), currently operating in
Florida, Massachusetts, Nevada and Texas. SSU I and SSU II are anticipated to
acquire certain assets of Skymint and Parallel, respectively, in
each case subject to certain closing conditions and milestones.
SNDL anticipates providing a further update on the Parallel and
Skymint transactions alongside its second quarter 2024 financial
and operational results.
SunStream USA – Strategic
Highlights
SNDL believes there are several benefits afforded through the
SunStream USA Group structure,
including:
- U.S. Equity Ownership: The SunStream USA Group structure will allow SNDL to take a
contingent indirect interest, on a pre-U.S. federal legalization
basis, in certain U.S. assets, that may be converted into common
interests upon the U.S. federal legalization of the sale of
cannabis products or enactment of other cannabis decriminalization
having the same effect (the "Legalization Trigger Event").
Previously, SNDL's joint venture in SunStream Bancorp was limited
to financing cannabis operators through credit investments
specifically structured to comply with all appliable laws. The
SunStream USA Group will serve as
a U.S. focused platform to acquire restructured assets of SunStream
Opportunities LP, as well as additional structured ownership
positions in select cannabis operators.
- Attractive Entry: The evolution from the deployment of
credit to structured contingent interests through the SunStream
USA Group rebalances SNDL's
risk-reward exposure, which upon a Legalization Trigger Event, will
afford SNDL the ability to obtain investment interests across the
capital structures of numerous MSOs. SNDL currently has no right or
ability to control or to financially benefit from the SSU
Exchangeable Securities. The repayment and redeployment of certain
existing senior credit investments into SSU Exchangeable Securities
provides SNDL exposure to U.S. cannabis assets, with entry vectors
anticipated to be at attractive valuations.
- Multi-State Operator: With the restructured Parallel
and Skymint transactions, which are subject to certain closing
conditions and milestone events, SunStream USA is anticipated to be a majority owner in
U.S. cannabis companies having assets in five U.S. states,
including Florida, Massachusetts, Nevada, Texas
and Michigan. Several of these
states are currently medical-only cannabis markets that have the
potential to legalize adult use sales in the coming years, with
Florida considering expansion into
adult use market in November
2024.
- Scale: Based on pro forma first quarter 2024
revenue (including the Parallel and Skymint businesses, which are
subject to certain closing conditions and milestone events),
SunStream USA's majority equity
interests would rank it among the top 10 MSOs. In the states in
which operations are conducted, SunStream USA, through its equity ownership position, is
anticipated to reach more than 60 million consumers, with aggregate
market sales of $5 billion.
- Optionality: SunStream USA, as a private and independently managed
and governed prospective equity holder in cannabis operators, will
have increased optionality for the acquisition and divesture of
assets, access to capital in a potential go-public event, and/or
opportunity to consolidate with SNDL, upon a Legalization Trigger
Event.
- US Federal Legalization: Upon a Legalization Trigger
Event, should SNDL exercise its conversion rights, and based on
first quarter 2024 revenue, SNDL's North American operations, on a
SunStream USA pro-forma
inclusive outlook, would potentially rank SNDL as a top five MSO on
a North American basis. Today, 24 states and D.C. have legalized
recreational cannabis, and 39 states have legalized cannabis for
medical use.
"The establishment and Regulatory Compliance of the SunStream
USA Group has unlocked a
remarkable opportunity for SNDL, and we are now poised to
restructure non-performing credit investments in SunStream
Opportunities LP," said Zach George,
Chief Executive Officer of SNDL. "This initiative creates
attractive optionality for SNDL upon federal legalization to deploy
additional investment capital into the SunStream USA Group structure, improving the return
potential of attractive U.S. cannabis assets in growing
markets."
ADVISORS
Dentons US LLP is advising SNDL with respect to U.S. state
regulatory and listing matters. For SunStream USA, DLA Piper is acting as transactional
legal counsel.
ABOUT SNDL INC.
SNDL is a public company whose shares are traded on the Nasdaq
under the symbol "SNDL."SNDL is the largest private-sector liquor
and cannabis retailer in Canada
with retail banners that include Ace Liquor, Wine and Beyond,
Liquor Depot, Value Buds, Spiritleaf, and Firesale Cannabis. SNDL
is a licensed cannabis producer and one of the largest vertically
integrated cannabis companies in Canada specializing in low-cost biomass
sourcing, indoor cultivation, product innovation, low-cost
manufacturing facilities, and a cannabis brand portfolio that
includes Top Leaf, Contraband, Palmetto, Bon Jak, Versus, Value
Buds, and Vacay. SNDL's investment portfolio seeks to deploy
strategic capital through direct and indirect investments and
partnerships throughout the North American cannabis industry. For
more information on SNDL, please go to https://sndl.com/.
ABOUT SUNSTREAM BANCORP
SunStream is a joint venture sponsored by SNDL Inc. that
leverages a strategic financial and operational partnership to
target attractive risk-return opportunities in the cannabis
industry in order to provide exposure to a broad portfolio of
investments. As of December 31, 2023,
investments made by SunStream had a carrying value of $404 million. In the period from inception until
December 31, 2023, SunStream has
deployed approximately $492 million
to seven companies, of which two investments have been monetized,
returning approximately $42 million
of capital.
Forward-Looking Statements
This news release includes statements containing certain
"forward-looking information" within the meaning of applicable
securities law ("forward-looking statements"). Forward-looking
statements in this release include, but are not limited to, the
acquisition of certain non-performing credit investments from
SunStream Opportunities LP by SunStream USA, the proposed acquisition by SSU I and SSU
II, respectively, of certain assets of Skymint and Parallel,
SunStream USA's expected leverage,
the occurrence of a Legalization Trigger Event and/or the potential
of certain U.S. states to legalize adult use sales in the coming
years, and statements regarding the future performance and/or
market share of any entity part of the SunStream USA Group. Forward-looking statements are
frequently characterized by words such as "plan", "continue",
"expect", "project", "intend", "believe", "anticipate", "estimate",
"may", "will", "potential", "proposed" and other similar words, or
statements that certain events or conditions "may" or "will" occur.
These statements are only predictions. Various assumptions were
used in drawing conclusions or making the projections contained in
the forward-looking statements throughout this news release.
Forward-looking statements are based on the opinions and estimates
of management at the date the statements are made, and are subject
to a variety of risks and uncertainties and other factors that
could cause actual events or results to differ materially from
those projected in the forward-looking statements. Neither SNDL nor
SunStream USA is under any
obligation, and expressly disclaims any intention or obligation, to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
expressly required by applicable law.
For more information on SNDL, please go
to www.sndl.com.
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SOURCE SNDL Inc.