Convenience store chain operator Alimentation Couche-Tard Inc. has made a strategic investment in Fire & Flower Holdings Corp., which will use the funds to develop its Hifyre digital retail platform and expand its network of cannabis retail stores.
Couche-Tard’s initial investment in the Edmonton-based company, announced Wednesday, will give it rights to 9.9% of Fire & Flower’s equity and the potential to increase its stake to 50.1% for a total of $380 million.
“Couche-Tard is excited to make this strategic investment in one of the fastest growing cannabis ‘pure-play’ retailers,” the Quebec-based retailer’s president and CEO Brian 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.”
Fire & Flower currently operates or licenses 23 cannabis retail stores in Alberta, Saskatchewan and Ontario and a wholesale distribution division in Saskatchewan.
“This strategic investment by Couche-Tard, one of the world’s largest retailers, is transformative for Fire & Flower,” CEO Trevor Fencott said in a statement.
He added that Couche-Tard’s leadership team and international footprint in major markets such as the United States, Mexico and Europe “provide us with outstanding opportunities for aggressive growth.”
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.
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% 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% 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.