High Tide Inc. announced today that its board of directors has approved the adoption of two shareholder rights plans designed to help the company remain compliant with cannabis laws in Canada while also protecting shareholders in the event of an unsolicited takeover attempt.
The Calgary-based cannabis retailer, which trades as HITI on the Nasdaq and TSX Venture Exchange, said the board approved a temporary shareholder rights plan, along with an amended and restated shareholder rights plan. Both agreements were entered into with Olympia Trust Company as rights agent and are dated June 26.
According to the company, the plans are intended to ensure High Tide can maintain compliance with applicable cannabis laws and retain its cannabis licenses. They are also meant to ensure that shareholders are treated fairly if an offer is made to acquire the company’s outstanding common shares, while giving the board time to consider alternatives that could provide greater value.
High Tide said the plans were not adopted in response to, or in anticipation of, any known or expected takeover bid.
The key changes expand the definition of an “Acquiring Person” to include certain cannabis retail license holders in Ontario and British Columbia if their ownership or influence would cause, or would reasonably be expected to cause, High Tide to violate provincial cannabis licensing rules.
In Ontario, the provision applies to cannabis retail operator license holders who, together with their affiliates, could put the company out of compliance with Section 2 of General, O. Reg. 468/18 under the Cannabis Licence Act, 2018. In British Columbia, it applies to retail store license holders whose ownership or influence could cause the company to violate rules related to holding or controlling more than the permitted number of licenses, or requirements under Sections 6 and 7 of the province’s Cannabis Licensing Regulation.
The company said the plans are otherwise similar to shareholder rights plans adopted by other Canadian companies and approved by shareholders, aside from provisions specifically designed to preserve compliance with cannabis licensing requirements.
High Tide said its existing shareholder rights plan can only be amended with shareholder approval, which is why the board adopted the temporary plan as an interim measure. The temporary plan is meant to address the new retail operator restrictions while the company seeks shareholder approval for the amended and restated plan.
The company does not intend to seek shareholder ratification of the temporary plan at its August 11 shareholder meeting. If shareholders approve the amended and restated plan, the temporary plan will lapse, leaving the amended and restated plan as the company’s single shareholder rights plan going forward.
If ratified, the amended and restated shareholder rights plan will remain in effect for three years.
High Tide said the TSX Venture Exchange has accepted the amended and restated plan, subject to certain conditions, including shareholder ratification within six months of its adoption. A summary of the plan’s principal terms will be included in the company’s management information circular, which will be sent to shareholders ahead of the August 11 meeting.
Copies of both plans will also be filed on the company’s SEDAR+ and EDGAR profile pages.
High Tide is the parent company of Canna Cabana, which it says is the largest cannabis retail chain in Canada, with 228 domestic locations and one international location. The company operates in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario, and says it holds a 12% share of Canada’s cannabis retail market.
