John SchroyerCanada-based Ayurcann Holdings Corp. (CSE: AYUR) (OTCQB: AYURF) is set to merge with special purpose acquisition company Arogo Capital Acquisition Corp. (NASDAQ: AOGO) in a deal that will make a combined entity worth $210 million, the pair announced Thursday.
Ayurcann, a cannabis extraction-focused company with a top-selling vape and pre-roll brand, pointed to its year-over-year revenue growth as one reason for its attractiveness to Arogo.
Still, the company has struggled to attain profitability, likely one reason for the merger, which should give Ayurcann more of a cash runway despite its financial losses to date.
Under the terms of the merger, Arogo – a so called “blank check company” – will get $19.6 million in cash on its balance sheet from Ayurcann, while Ayurcann shareholders will see their shares benefit from “an implied pro forma enterprise value of approximately $210 million, at a price of $10.00 per share.” Following closing, the number of shares will be consolidated down from about 260 million to 26 million.
The deal is expected to close in the second half of this year and is still subject to approval by Ayurcann shareholders.
“This business combination is set to drive the business onto a new growth trajectory, enhancing its capabilities and expanding the market reach in meaningful ways,” said Suradech Taweesaengsakulthai, CEO and Director of Arogo, in a statement.
As a “finder’s fee,” ARC Group Limited will receive 799,731 common shares of the new entity.
