An Edmonton-based cannabis retailer is planning to significantly accelerate its growth and expansion after entering into a deal with one of North America’s largest operators of convenience stores and gas bars.
Alimentation Couche-Tard Inc. has agreed to make a strategic investment in Fire & Flower Holdings Corp. of Edmonton, which will use the funds to develop its Hifyre digital retail platform and expand its network of cannabis retail stores.
“This strategic investment by Couche-Tard, one of the world’s largest retailers, is transformative for Fire & Flower,” said Trevor Fencott, Fire & Flower’s chief executive officer, in a media release posted on its website.
“The retail cannabis platform we developed marries a best-in-class in-store experience with our proprietary Hifyre digital infrastructure and this is a huge vote of confidence in the platform.
The companies say Couche-Tard’s initial investment would initially give it rights to 9.9 per cent of Fire & Flower’s equity, with the potential to increase its stake to 50.1 per cent in return for a total of about $380 million in growth capital.
Fire & Flower currently operates or licenses 23 cannabis retail stores in Alberta, Saskatchewan and Ontario and a wholesale distribution division in Saskatchewan.
Alimentation Couche-Tard is one of North America’s largest operators of convenience stores and gas bars, primarily under the Circle K global brand and under the Couche-Tard banner in its home province of Quebec.
Fencott cites the opportunities created by Couche-Tard’s international operations, which includes major markets in the U.S., Mexico and Europe.
Couche-Tard chief executive Brian Hannasch says the investment will enable the Laval-based retail chain to accelerate its move into the cannabis sector.
“Couche-Tard is excited to make this strategic investment in one of the fastest growing cannabis ‘pure-play’ retailers,” Hannasch said in a statement.
“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.”
The companies say an indirect subsidiary of Couche-Tard will initially buy about $26 million of convertible debt securities that can be converted to 24.3 million common shares at a price of $1.07 each, representing 9.9 per cent of equity.
At the same time, Couche-Tard will receive three series of warrants allowing it to purchase more shares. It will also get the right to top up its investment to maintain its ownership percentage.
Fire & Flower’s stock is currently listed on the TSX Venture Exchange but it has received conditional approval to list its shares on the Toronto Stock Exchange concurrent with the transaction.
Fire & Flower’s stock price jumped 20 per cent to a two-month high at $1.37 a share following the announcement, while Couche-Tard stock was essentially flat at $80.73 in early trading Wednesday.