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Tokyo Smoke has now entered into a share subscription agreement with its parent company, pursuant to which the parent company, TS Investments Corp., will acquire all of the issued and outstanding shares of Tokyo Smoke.
A judge endorsed the agreement on September 18 and announced by Tokyo Smoke on September 19. The purchase price is around $77 million, and the buyer is obliged to take on certain liabilities of Tokyo Smoke.
As part of the stalking horse agreement, Tokyo Smoke was also approved to restructure its previously announced CCAA process from August. This will allow Tokyo Smoke to open the sale and investment solicitation process (SISP).
The Company has obtained approval from the Court in its restructuring proceedings commenced under the Companies’ Creditors Arrangement Act (the “CCAA“) to implement a sale and investment solicitation process (the “Sale Process“) to seek interest in and opportunities for a sale, restructuring, recapitalization or other form of reorganization of the Company’s business for a purchase price above the purchase price being offered by the TS Investments Corp under the stalking horse agreement. TS Investments Corp is Tokyo Smoke’s sole shareholder.
Interested bidders can participate in the two-phase sales process beginning September 20, 2024. The first phase has a goal to solicit non-binding letters of interest. The deadline to submit letters of interest compliant with the sale process terms is 5:00 pm Eastern Time on October 21, 2024. The second phase will seek binding agreements from compliant parties, with bids to be submitted by 5:00 pm Eastern Time on November 11, 2024.
The consummation of any bid, including the bid submitted by the Buyer under the Stalking Horse Agreement, is subject to closing conditions that are customary for transactions of this nature under the CCAA, including compliance with the applicable bidding procedures and approval of the Court.
Tokyo Smoke notes that it began the restructuring proceedings under the CCAA in order to align its operations with current market and regulatory conditions, which it says have changed significantly since the initial licensing regimes were introduced. Tokyo Smoke intends to exit from CCAA protection as a stronger business, better positioned to continue providing premium products to its customers over the long term while continuing to provide jobs to its dedicated employees across Canada.
Toko Smoke’s monitor in the process, Alvarez and Marsal, will post on its website, as soon as practicable, any modification, amendment, variation or supplement to the bidding procedures and inform the bidders impacted by such modifications.
An updated service list posted on September 17 includes Canopy Growth, National Cannabis Distribution, Health Canada, Canada Revenue Agency, the Attorney General of Canada, Ontario Ministry of Finance, the AGCO, Alberta Ministry of Justice, the government of Newfoundland and Labrador, the Manitoba LGCA, the government of Manitoba Department of Finance and Taxation Division, the SLGA, and Saskatchewan Finance.
A list of Tokyo Smoke’s creditors from August 30 shows more than $94 million owed to secure and unsecured creditors.
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