Current Price: C$7.73
Offer Price: C$7.55 - C$8.30
Upside: C$56 (for odd-lots at the upper limit)
Expiration date: 12th May
On the 7th of April, Canadian liquor and cannabis retailer Alcanna launched a substantial issuer bid for 9%-10% of its outstanding common shares at a price range of C$7.55 - C$8.30. The proposal includes an odd-lot provision. Paid-up capital stands at C$9.80/share, so withholding taxes won't be applied here for non-resident investors.
Odd-lot positions currently offer C$56 upside at the upper limit vs C$18 downside if the tender gets priced at the lower limit. Participation with a larger position seems risky and is not recommended as the tender size is rather small and the price is set at an all-time high.
Nonetheless, there are some counter-arguments to consider here:
- Directors own 4.4% of CLIQ and so far have indicated no intention to tender (although they have reserved the right to change the decision).
- No shareholders own 10% or more of the outstanding shares.
- The company is facing several tailwinds for its liquor operations (higher demand due to COVID-19) and has exposure to the cannabis industry. CLIQ performed well in 2020 - revenues went up 17% YoY, operating profit was C$22.6m vs loss of C$30.5 in 2019, and net income was C$68m vs loss of C$32.3m in 2019. As a result, the share price has almost doubled since Jan'20, so shareholders could decide to continue riding the momentum and refrain from tendering.
Alcanna operates 176 liquor stores in Canada and also used to own 33 retail cannabis stores. The cannabis business got spun-off recently (March 22nd) via a reverse merger as a result of which, CLIQ now owns 63% of Nova Cannabis (pure-play Canadian cannabis retailer).
Please refer to this VIC write-up (pre-Covid) for more background on the company.