Mergers & Acquisitions

Couche-Tard Takes Stake in Cannabis Retailer

Investing $26 million in 'new and flourishing sector' to facilitate market expansion
Photograph courtesy of Fire & Flower

LAVAL, Quebec — Alimentation Couche-Tard Inc. has made a strategic investment in Fire & Flower Holdings Corp., an independent cannabis retailer. Couche-Tard will invest approximately $26 million to obtain a 9.9% ownership interest in Fire & Flower, which Couche-Tard could increase to 50.1%.

“Couche-Tard is excited to make this strategic investment in one of the fastest-growing cannabis ‘pure play’ retailers,” said Brian Hannasch, president and CEO of Couche‑Tard. “This investment in Fire & Flower, with a path to a controlling stake, will enable us to leverage their leadership, network and advanced digital platform to accelerate our journey in this new and flourishing sector.”

This is Couche-Tard’s second foray into cannabis. In February, the company entered into a multiyear agreement with Canopy Growth Corp., a diversified cannabis and hemp company, to sell recreational marijuana in Ontario.

Based in Edmonton, Alberta, Fire & Flower, an independent adult-use cannabis retailer, operates or licenses 23 stores in Alberta, Saskatchewan and Ontario and a wholesale distribution division in Saskatchewan. The company guides consumers through the complex world of cannabis through education-focused retailing using its proprietary HiFyre digital platform, it said. Fire & Flower focuses on the safe, responsible and lawful sale of cannabis.

Fire & Flower will leverage Couche-Tard’s international infrastructure and experience for global expansion opportunities. The investment will provide Fire & Flower with additional capital to further accelerate its expansion strategy, significantly accelerating the number of stores it is able to open as well as the number of markets it is potentially able to access.

“This strategic investment by Couche-Tard, one of the world’s largest retailers, is transformative for Fire & Flower,” said Trevor Fencott, Fire & Flower’s CEO. “The support of Couche-Tard’s world-class leadership team, coupled with their capital strength and impressive international footprint, provides us with outstanding opportunities for aggressive growth.”

Couche-Tard’s investment is in the form of unsecured convertible bonds to obtain a 9.9% ownership interest in Fire & Flower upon conversion into stock. Couche-Tard will concurrently receive three series of share purchase warrants, which, if exercised in full, would subsequently increase Couche-Tard’s ownership interest to 50.1% on a fully diluted basis, assuming the conversion in full of the bonds.

At closing, Couche-Tard will immediately be granted nomination rights to the board of Fire & Flower, which will escalate commensurate with the exercise of the warrants and the increase in Couche-Tard’s ownership position.

In connection with the transaction, Couche-Tard will also be granted participation and top-up rights to maintain its equity ownership percentage going forward, as well as certain customary registration rights.

The deal is subject to customary closing conditions and applicable regulatory approvals, including Fire & Flower shareholder approval. The Fire & Flower board has unanimously determined that the transaction is in the best interest of Fire & Flower and is unanimously recommending that shareholders of Fire & Flower vote in favor of the transaction.

  • Couche-Tard is No. 2 in CSP's2019 Top 202 ranking of U.S. c-store chains by number of retail outlets.

Laval, Quebec-based Couche-Tard’s network consists of 9,866 mostly Circle K convenience stores throughout North America. Through CrossAmerica Partners LP, Couche-Tard supplies fuel under various brands to approximately 1,300 locations in the United States. In Europe, Couche-Tard operates 2,709 c-stores and fuel outlets across Scandinavia, Ireland, Poland, the Baltics and Russia. Licensees operate more than 2,150 Circle K c-stores in 15 other countries and territories (Cambodia, China, Costa Rica, Egypt, Guam, Honduras, Hong Kong, Indonesia, Macau, Mexico, Mongolia, New Zealand, Saudi Arabia, the United Arab Emirates and Vietnam), which brings its worldwide total network to more than 16,000 stores.

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