Why Alcanna Jumped 11% on Thursday

Alcanna (TSX:CLIQ) shares flew upwards ahead of a vote that could see Sundial Growers (NASDAQ:SNDL) finally acquire the alcohol retailer.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published January 6, 2022 12:06 pm EST

| More on: SNDL

Alcohol retailer Alcanna (TSX:CLIQ) saw shares climb 11% on Jan. 6 after the company announced a vote would move forward on Jan. 7 in a deal with Sundial Growers (NASDAQ:SNDL).

What happened?

This is the latest in an agreement between Sundial and Alcanna that started back on Oct. 7, 2021. The new consideration includes a cash component, where Alcanna shareholders would receive 8.85 common shares of Sundial for every Alcanna share, along with $1.50 in cash. As of the announcement, that would convert to $8.43 per Alcanna share, with Alcanna trading at $7.34 as of writing.

This value represents a premium of about 15% as of writing, leading shareholders to flock towards the alcohol retailer ahead of Friday’s vote. In the vote, shareholders will be asked to vote for the acquisition.

So what?

This is the latest in a string of revisions from when the original deal was announced last October. In it, Calgary-based Sundial proposed to acquire Alcanna for about $346 million. This would give Sundial access to 176 locations in Alberta and British Columbia, and 53 cannabis retail stores in Alberta, Ontario, and Saskatchewan.

Through the deal, Sundial believes it will deliver more than $15 million in additional EBITDA annually through both synergies and strategic initiatives.

The deal came as a bit of a surprise to analysts, though it seems like a strategic fit. It was almost immediately met with the question as to why cash was not included, which the company has now remedied through this recent amendment.

Now what?

Given the premium expected from the deal, shareholders seem interested in getting in on Alcanna before the deal goes through. They would therefore receive more cash and more Sundial shares afterwards. Shares of Alcanna soared to $10 per share back in November, when it looked like the deal was done, only to fall back after the vote didn’t go through.

This is a second shot at the top, though investors should be careful. There could be another pullback, so I would only consider it if it remains under that premium.

Votes are due before 6:30 AM EST on Jan. 7, 2022. Shares of Alcanna are up 21% in the last year.