Canadian retail chain Fika Cannabis won an auction for Fire & Flower Holdings, the technology-powered, adult-use cannabis retailer in which an affiliate of Alimentation Couche-Tard was the largest shareholder.
The online auction was held on August 15, 2023, in accordance with the company's court-approved sale and investment solicitation process.
Fire & Flower announced on June 6th that it, including subsidiaries Fire & Flower Inc., 13318184 Canada Inc., 11180703 Canada Inc., 10926671 Canada Ltd., Friendly Stranger Holdings Corp., Pineapple Express Delivery Inc. and Hifyre Inc. had filed for creditor protection from the Ontario Superior Court of Justice under the Companies' Creditors Arrangement Act.
It said at the time that its board determined that it was in the best interests of the company to file an application for creditor protection following a review of its strategic options and a consideration of all of its available alternatives.
In order to fund the CCAA proceedings and other short-term working capital requirements, Fire & Flower signed an agreement with the ACT affiliate for a $9.8-million debtor-in-possession loan.
On June 21, Fire & Flower announced that its had received approval from the Ontario Superior Court of Justice under the Companies' Creditors Arrangement Act for "the implementation of a sale and investment solicitation process to be conducted by FTI Consulting Canada Inc., as Court-appointed monitor of the Fire & Flower Group (the "Monitor"), with the assistance of the Company (the "SISP"); and (ii) a stalking-horse agreement (the "Stalking Horse Agreement") between the Company and 2707031 Ontario Inc. (the "Stalking Horse Bidder"), an affiliate of Alimentation Couche-Tard Inc. ("ACT"), pursuant to which the Stalking Horse Bidder would act as stalking-horse bidder under the SISP."
However, thing grew contentious when several parties, including Fire & Flower's second largest shareholder, opposed the proposed stalking-horse agreement between the cannabis retailer and the ACT affiliate:"A stalking horse bid is an initial bid on the assets of a bankrupt company, setting the low-end bidding bar so that other bidders can’t underbid the purchase price," according to Investopedia.
As reported by MJBizDaily, the judge sided with the ACT affiliate, which owns approximately 35.7% of Fire & Flower’s issued and outstanding common shares.
“All parties are in agreement about the dire circumstances in which the Applicants find themselves, and about the necessity for fundamental change,” the judge said in the ruling. “Very material operating losses have been incurred and continue. Similar challenges to those facing the Applicants are facing other operators in the retail cannabis sector as well.”
Interested parties had until July 15 to submit their intentions.
Fire & Flower announced in release August 17 that following an online auction, Toronto-based Fika was the successful bidder. Subsequently, Fire & Flower and Fika entered into a subscription agreement with a proposed closing date of September 8, 2023, subject to receipt of approval from the Ontario Superior Court of Justice under the Companies' Creditors Arrangement Act, as well as certain other regulatory approvals.
In a statement, Fire & Flower said it "intends to appear before the Court as soon as possible to seek an order approving the transactions contemplated by the Subscription Agreement."
In addition, the company announced the resignation of CFO John Chou and the appointment of John Rim as interim CFO.
More to come...