Alcanna (CLIQ.TO) – Odd-Lot Tender Offer – C$56 Upside

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

Issuer bid circular

 

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

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.

5 COMMENTS

  1. Mike

    sorry for the novice question but where would you elect to tender your shares?

    1. dt

      You would need to check with your broker how to do that as every broker has different procedures and forms. IB usually sends messages with corporate actions to shareholders asking to fill out details for shares to be submitted to the tender (include the price at which one wants to tender).

  2. Ilja

    Alcanna odd-lot tender offer closed slightly above the opening price indicated in the write-up resulting in zero profits on this tender offer.

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