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Cannabis producer Aphria calls U.S. company’s proposed hostile takeover ‘quite risky’

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Aphria Inc. shares shot up as much as 14 per cent early Friday, before giving up some of their initial gains, as investors responded to an American company’s hostile takeover proposal that valued the Ontario-based cannabis company at $2.8 billion.

Aphria shares were off their early highs at $8.46 after 30 minutes of trading at the Toronto Stock Exchange, up 89 cents from Thursday’s close at $7.57.

The Ohio-based Xanthic Biopharma Inc., which does business as Green Growth Brands, announced after Thursday’s close that its takeover offer valued Xanthic shares at $7 each and Aphria shares at $11 per share.

Aphria responded before markets opened on Friday, saying the actual value of Xanthic shares is substantially lower than the announced offer price and, at current market rates, undervalues the Leamington-based cannabis producer.

In early trading Friday, Xanthic shares fell seven per cent to $4.60, down 38 cents, at the Canadian Securities Exchange. At that price, its offer of 1.5714 Xanthic shares would value Aphria shares at about $7.23.

The newly installed chairman of Aphria’s board said in a statement Friday that “their proposal falls short of rewarding our shareholders for participating in such a transaction.”

“Further, the proposed offer is quite risky given GGB’s condition to complete a brokered financing at a price that is more than double the recent average of their share price, as a key term to the proposal,” said Irwin Simon, who was named chairman of the Aphria board after Green Growth Brands announced its offer Thursday afternoon.

Vic Neufeld, who had been chairman, will remain Aphria’s chief executive officer and a director on Aphria’s board.

Cannabis companies’ shares volatile

Shares of most publicly traded cannabis companies have been volatile over the last few months, including those of Aphria Inc., after its planned acquisition of LATAM Holdings Inc. came under fire in early December.

In early December, short-sellers Quintessential Capital Management and Hindenburg Research alleged that the company’s acquisition of the LATAM Holdings assets in Colombia, Argentina and Jamaica totalling $280 million from Scythian Biosciences were “largely worthless.”

Gabriel Grego, of Quintessential Capital Management, argued Aphria had spent $700 million buying up subsidiaries which don’t add any value to the company and did little besides enriching insiders at the companies that were taken over.

Short-seller Hindenberg levelled fresh criticism Friday, suggesting the proposed takeover may not be hostile at all.

It said Green Growth Brands’ second largest shareholder is a fund sponsored by Green Acre Capital, “a firm that lists none other than Aphria CEO Vic Neufeld on its board of advisors.”

“Aphria has invested directly in the fund and therefore already owns a significant stake in GGB,” the statement said.

Additionally, its statement said Green Growth recently listed a current Aphria board member on its own board of directors, and that other recent Green Growth directors have “obvious affiliations with Aphria.”

Takeover offers that are made directly to shareholders without approval of the target company’s board of directors are considered to be hostile bid. But Green Growth CEO Peter Horvath said Friday that his company would prefer a friendly deal because the proposal hinges on the expertise that each company brings to the table.

“Aphria brings proven cultivation experience and, from what we’ve seen, they’re bringing that in a highly sophisticated and technological way to cannabis,” Horvath said in an interview with The Canadian Press.

Horvath also said in a statement Thursday that an acquisition of Aphria would increase value for shareholders of both companies.

“We are confident that the significant premium we are offering and the opportunity to participate in the growth of a stronger, combined company are so compelling that we are taking our offer directly to Aphria’s shareholders,” he said.

But Hindenberg says that’s not the case.

Its statement said Green Growth was just formed this year, has almost no revenue or tangible assets, and has limited operations. “Despite this, its newly listed, thinly traded stock has spiked to a market cap of $890 million on average daily dollar volume of only $1.3 million.”

Hindenberg called Green Growth “largely a worthless entity with numerous signs of Aphria related-party influence.”

“This entire proposed deal strikes us as merely an epic next step of Aphria’s brazen shell game,” the statement said.

Shares of publicly traded companies selling cannabis have been volatile over the last few months. (Graeme Roy/Canadian Press)

Aphria, which has its main operations in the southwestern Ontario community of Leamington, said it has established an independent committee of directors to consider any formal offers it receives.

In the meantime, Aphria said it would continue to execute its current corporate strategy.

“It’s business as usual for us right now,” said John Jacobs Jr., Aphria’s labour director.

Requests for further comment from Aphria’s executive team were declined.

Class-action bid filed

Earlier this month, a Toronto law firm said it filed a proposed class action against Aphria and its chief executive and financial officers after the company was targeted by short-sellers.

Koskie Minsky LLP alleges Aphria made false and misleading statements related to its acquisition of LATAM Holdings, a claim that has not been tested in court.

The proposed class action came after the short-sellers’ allegations.

Aphria said on Dec. 6 that it had set up a special committee of independent directors to review the LATAM acquisition.

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7 Tips For First-Time Home Buyers In Calgary

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Buying a house for the first time can be overwhelming to say the least. If you’re wondering what neighbourhood to go with, what you can afford, or even how to just get started on the process, let us take some stress off your hands! We’ve teamed up with Hopewell Residential to give you 7 tips to ensure the home you end up with is everything you dreamed of.

Hopewell Residential is a five-time Developer of the Year award winner, so their expertise is second-to-none in Calgary and beyond. Who better to learn home-buying tips from than the homebuilders themselves?

Create a checklist of needs & wants

This is a biggie. When you’re buying your very first home, you’ll want to weigh your needs vs. your wants. Ensuring you have what you love in your first home is a big, big deal.

What should you do? Easy. Set up a list of needs and a list of wants, but be pretty strict with yourself, and make sure you take your lifestyle into consideration. With the increase in remote work over the past year, it’s important to keep in mind that a home office or flex room might just be the key to maximizing at home happiness. Especially if you’re thinking you might be expanding your family later on, spare rooms and extra space is key (but more on that later!).

Or for instance, you might need a home in an area with a high walkability score, but you want to be close to certain amenities. Set yourself up with the right level of compromise and the number of homes that actually fit your ‘perfect’ idea will skyrocket.

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‘Don’t give up’: Ottawa Valley realtors share statistics, tips for homebuyers in ‘extreme’ sellers market

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The real estate market in the Ottawa Valley can be summed up this way: people from far and wide are in a buying frenzy, but there’s hardly anything to buy at the “store,” and the limited inventory is overpriced.

This “stampede” — as one realtor described it — will affect rural towns as residents grapple with finding affordable housing and agonize over their inability to purchase homes in their price range.

“We are seeing a lack of inventory in all price ranges,” said Laura Keller, a real estate agent from Carleton Place.

Helen Vincent, a Renfrew realtor, said she’s never seen a market like this in her 36 years of practice. “We postpone offers for four to five days in order to get all the buyers,” she said.

Multiple offers — between seven and 10 — became the norm, with cash offers and no conditions, as buyers faced bidding wars. “In Ottawa, they have up to 50 (offers),” she added.

“It’s very stressful. You’re going to get nine (people) ticked off, and one happy. So many people are disappointed,” Vincent said.

Terry Stavenow, an Arnprior realtor for 40 years, said that “the pent-up need took over with inventory going low. It made a stampede on everything that was available.“

“Brand new housing — it’s very much gone. Several building developers are rushing to get inventory. They usually don’t do construction in the winter months,” said Stavenow.

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10 Tips For First-Time Home Buyers

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Buying a home for the first time is exciting and a commitment to the future. It’s often challenging, too, and the process requires a lot of steps, many of which can be tricky to navigate as a first-time home buyer.

What are some things you should keep in mind as a first-time home buyer?

First-Time Home Buyer Tips

Here are 10 tips to keep in mind as you begin your journey toward homeownership.

1. Have Your Finances in Order

It’s wise to begin saving as early as possible once you’ve made the decision to purchase a house. You’ll need to consider the down payment, closing costs (which often range from 2% to 5% of the down payment), as well as move-in expenses.

You also need to understand the other costs of homeownership, such as mortgage insurance. property taxes, utilities, homeowner’s insurance, and more.

2. How Much Can You Afford?

Knowing how much you can realistically afford in a home is another important financial consideration. Look for the home of your dreams that fits your budget.

One way to avoid future financial stress is to set a price range for your home that fits your budget, and then staying within that range. Going through the preapproval process will help you understand what price range is realistic for your budget.

3. Make Sure Your Credit is Good

Another thing to keep in mind as a first-time home buyer is your credit score because it determines whether you qualify for a mortgage and affects the interest rate that lenders offer. 

You can check your credit score from the three credit bureaus – Experian, Equifax, and TransUnion.

This is another good reason for getting preapproved before you start your search. Learn more about the preapproval process and your credit score.

4. Choose The Right Real Estate Agent

A good real estate agent guides you through the process every step of the way. He or she will help you find a home that fits your needs, help you through the financial processes, and help ease any first-time buyer anxiety you may have.

Interview several agents and request references.

5. Research Mortgage Options

A variety of mortgages are available, including conventional mortgages – which are guaranteed by the government – FHA loans, USDA loans, and VA loans (for veterans).

You’ll also have options regarding the mortgage term. A 30-year fixed-rate mortgage is popular among many homebuyers and has an interest rate that doesn’t change over the course of the loan. A 15-year loan usually has a lower interest rate but monthly payments are larger.

6. Talk to Multiple Lenders

It’s worth your time to talk to several lenders and banks before you accept a mortgage offer. The more you shop around, the better deal you’re liable to get – and it may save you thousands of dollars.

7. Get Preapproved First

Getting a mortgage preapproval (in the form of a letter) before you begin hunting for homes is something else to put on your checklist. A lender’s preapproval letter states exactly how much loan money you can get.

Learn more about the preapproval process and how preapproval provides you with a significant competitive advantage in our article How Preapproval Gives You Home Buying Power.

8. Pick the Right House and Neighborhood

Make sure to weigh the pros and cons of the different types of homes based on your budget, lifestyle, etc. Would a condominium or townhome fit your needs better than a house? What type of neighborhood appeals to you?

9. List Your Needs and Must-Haves

The home you purchase should have as many of the features you prefer as possible. List your needs in order of priority; some things may be non-negotiable to you personally.

10. Hire an Inspector

Hiring an inspector is another crucial step in the home buying process. An inspector will tell you about existing or potential problems with the home, and also what’s in good order. You can learn more about home inspections and how to find a home inspector through the American Society of Home Inspectors website.

Buying a home for the first time is a challenge, but it’s one you can handle with the right planning and preparation.

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