Tilray Acquires Manitoba Harvest from Compass Holdings

This post contains two press releases from the buyer and seller of the acquired company.

Tilray® to Acquire Manitoba Harvest, the World’s Largest Hemp Food Company

Acquisition unites cannabis pioneer with leading natural food CPG company to create hemp and CBD-infused food and wellness products for North America

NANAIMO, British Columbia–(BUSINESS WIRE)–Tilray, Inc. (“Tilray” or “the Company”) (NASDAQ:TLRY), a global leader in cannabis research, cultivation, production and distribution, today announced it has entered into a definitive agreement (the “Agreement”) pursuant to which Tilray will acquire all of the issued and outstanding securities of FHF Holdings Ltd. (“Manitoba Harvest”), from Compass Group Diversified Holdings, LLC (“The Compass Group”) (NYSE:CODI) and other shareholders of Manitoba Harvest (the “Transaction”). Under the terms of the Agreement, Tilray will acquire Manitoba Harvest on a cash and debt-free basis, for an aggregate purchase price, including cash and class 2 Common Stock in the capital of Tilray (“Tilray Shares”), of up to C$419 million pending the achievement of certain milestones after the closing of the Transaction.

Founded in 1998, Manitoba Harvest is the world’s largest hemp food manufacturer and a leader in the natural foods industry. It produces, manufactures, markets and distributes a broad-based portfolio of hemp-based consumer products, which are sold in over 16,000 stores at major retailers across the U.S. and Canada. Products in the Manitoba Harvest portfolio include: Hemp Hearts™, Hemp Oil™, Hemp Yeah!™ granola, Hemp Yeah!™ protein powder and Hemp Bliss™ milk. Manitoba Harvest has plans to launch a line of CBD containing Broad Spectrum Hemp Extracts as well as a line-up of Hemp Yeah! wellness bars this summer.

Together, Tilray and Manitoba Harvest plan to grow both companies’ revenue while bringing nutritious hemp foods and supplements to more households across the U.S. and Canada. The acquisition will expand Tilray’s product portfolio into the natural foods category and bring Manitoba Harvest expertise in working with cannabinoids, including cannabidiol (CBD). By leveraging Manitoba Harvest’s established distribution network, Tilray plans to accelerate its expansion into the U.S. and Canadian markets, where legal, for CBD products. Manitoba Harvest also brings to Tilray an experienced team and manufacturing capabilities, including the addition of two high quality BRC AA+ certified manufacturing facilities as well as significant sales and distribution capabilities.

“Tilray’s acquisition of Manitoba Harvest is a milestone for the cannabis industry. It builds on the strategic partnerships we have formed with consumer brand industry leaders and demonstrates our track record of disrupting the global pharmaceutical, alcohol, CPG, and functional food and beverage categories,” said Brendan Kennedy, Tilray President and CEO. “We’re excited to work with Manitoba Harvest to develop and distribute a diverse portfolio of branded hemp-derived CBD food and wellness products in the U.S. and Canada.”

“We are excited about being an important part of the growth strategy for Tilray,” said Bill Chiasson, Manitoba Harvest CEO. “By leveraging our combined strengths and capabilities, we will be able to accelerate our mission of transforming consumer health through the power of hemp.”

Upon completion of the acquisition, Manitoba Harvest will operate as a wholly-owned subsidiary of Tilray, leveraging the Tilray team’s global cannabis industry expertise and other strategic partners. Manitoba Harvest will continue to operate its seed-to-shelf supply chain model and leverage its retail relationships across North America. Tilray and Manitoba Harvest will also work together to develop innovative new CBD wellness products and hemp-based consumer food products.

Additional Transaction Details
Of the aggregate maximum C$419 million purchase price, Tilray will pay C$277.5 million at closing, comprised of C$150 million in cash and C$127.5 million in Tilray Shares. Six months after closing, Tilray will pay C$92.5 million, comprised of C$50 million in cash and C$42.5 million in Tilray Shares. Tilray will issue an additional C$49 million in Tilray Shares based on Manitoba Harvest achieving certain performance milestones in 2019, such amount to be reduced to the extent that some or all of the milestones are not achieved. The transaction will be subject to normal post-closing adjustments.

The closing of this Transaction is subject to customary terms and conditions as well as court approval. The Transaction will be completed by plan of arrangement under the Business Corporations Act of British Columbia. The Transaction is expected to close within the next 30 days.

Blake, Cassels & Graydon LLP acted as Canadian legal counsel to Tilray and Cooley LLP acted as Tilray’s U.S. legal counsel. Cowen provided a fairness opinion to Tilray’s board of directors in connection with the transaction.

Stikeman Elliott LLP acted as legal counsel to sellers. Jefferies LLC acted as financial advisor to Compass Group Diversified Holdings LLC in connection with the transaction.

About Tilray®
Tilray is a global pioneer in the research, cultivation, production and distribution of cannabis and cannabinoids currently serving tens of thousands of patients and consumers in twelve countries spanning five continents.

About Manitoba Harvest
Headquartered in Winnipeg, Manitoba, and founded in 1998, Manitoba Harvest is a pioneer and global leader in branded, hemp-based foods. The company is the world’s largest vertically-integrated hemp food manufacturer and is strategically located near its supply base in Canada. Manitoba Harvest’s 100% all-natural product lineup includes hemp hearts, hemp protein powder and hemp snacks and are currently carried in about 16,000 retail locations across the U.S. and Canada.

About Compass Diversified Holdings (CODI)
CODI owns and manages a diverse family of established North American middle market businesses. Each of its current subsidiaries is a leader in its niche market. CODI maintains controlling ownership interests in each of its subsidiaries in order to maximize its ability to impact long term cash flow generation and value. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and to make cash distributions to its shareholders.

Compass Diversified Holdings Announces Sale of Manitoba Harvest to Tilray

Transaction Expected to Result in Sizable Gain on Sale

Compass to Reduce Debt and Strengthen Balance Sheet

WESTPORT, Conn., Feb. 20, 2019 (GLOBE NEWSWIRE) — Compass Diversified Holdings (NYSE: CODI) (“CODI” or the “Company”), an owner of leading middle market businesses, announced today that it has entered into a definitive agreement (the “Agreement”) to sell its majority owned subsidiary, FHF Holdings Ltd. (“Manitoba Harvest”), to Tilray Inc. (“Tilray”) (NASDAQ: TLRY), a global leader in cannabis research, cultivation, production, and distribution. Under the terms of the Agreement, Manitoba Harvest will be sold to Tilray for an aggregate sales price of up to C$419 million.

The Company expects to realize a sizable gain on the sale and intends to use the net proceeds to repay outstanding debt under the Company’s revolving credit facility.

Commenting on the transaction, Elias Sabo, CEO of Compass Diversified Holdings, stated, “We acquired a majority interest in Manitoba Harvest over three years ago and are proud to have partnered with the company to raise awareness of Hemp as a super food, growing the customer base across North America, more than doubling household penetration in the U.S., and driving category expansion. I want to thank Bill Chiasson and the company’s exceptional management team and wish them continued success. I am thrilled that they will be partnering with a recognized global category leader in Tilray, where they will have an unparalleled opportunity in a rapidly expanding market.”

Bill Chiasson, CEO of Manitoba Harvest, added, “With CODI’s support, guidance, and patient investment style, Manitoba Harvest has solidified its position as the world’s largest vertically integrated hemp food brand. CODI’s ability and willingness to make substantial investments into consumer marketing for our leading brands has resulted in a greatly expanded consumer appreciation of hemp-based food products, accelerating sales growth, and a ubiquitous market presence in highly desirable retail locations. I would like to thank CODI for all that they have done to bring Manitoba Harvest to the transformative market opportunity that we are realizing today.”

Mr. Sabo concluded, “Manitoba Harvest highlights CODI’s proven model of identifying and acquiring niche leading businesses, utilizing our significant liquidity and permanent capital to execute value-added initiatives to strengthen our subsidiaries, and opportunistically divesting our businesses to enhance value creation for our shareholders. With this transaction, we will significantly increase our total realized gains and we intend to deploy the net proceeds towards repaying our revolving credit facility.”

Under the terms of the Agreement, shareholders of Manitoba Harvest, including CODI, will receive up to C$419 million, of which C$277.5 million is payable at closing, comprised of C$150 million in cash and C$127.5 million in Tilray Shares. Six months after closing, Manitoba Harvest shareholders, including CODI, will receive C$92.5 million, comprised of C$50 million in cash and C$42.5 million in Tilray Shares. Manitoba Harvest shareholders, including CODI, will receive an additional C$49 million in Tilray Shares upon Manitoba Harvest achieving certain performance milestones in 2019, such amount to be reduced to the extent that some or all of the milestones are not achieved.  The transaction will be subject to normal post-closing adjustments.

The closing of this transaction is subject to customary terms and conditions and court approval. The transaction will be completed by plan of arrangement under the Business Corporations Act of British Columbia. The transaction is expected to close within the next 30 days.

Stikeman Elliott LLP acted as legal counsel to sellers. Jefferies LLC acted as financial advisor to CODI in connection with the transaction.

About Compass Diversified Holdings (“CODI”)
CODI owns and manages a diverse family of established North American middle market businesses. Each of its current subsidiaries is a leader in its niche market.

CODI maintains controlling ownership interests in each of its subsidiaries in order to maximize its ability to impact long term cash flow generation and value. The Company provides both debt and equity capital for its subsidiaries, contributing to their financial and operating flexibility. CODI utilizes the cash flows generated by its subsidiaries to invest in the long-term growth of the Company and to make cash distributions to its shareholders.

Our ten majority-owned subsidiaries are engaged in the following lines of business:

• The design and marketing of purpose-built tactical apparel and gear serving a wide range of global customers (5.11);

• The manufacture of quick-turn, small-run and production rigid printed circuit boards (Advanced Circuits);

• The manufacture of engineered magnetic solutions for a wide range of specialty applications and end-markets (Arnold Magnetic Technologies);

• Environmental services for a variety of contaminated materials including soils, dredged material, hazardous waste and drill cuttings (Clean Earth);

• The design and marketing of wearable baby carriers, strollers and related products (Ergobaby);
• The design and manufacture of custom molded protective foam solutions and OE components (Foam Fabricators);

• The design and manufacture of premium home and gun safes (Liberty Safe);

• The manufacture and marketing of branded, hemp-based food products (Manitoba Harvest);

• The manufacture and marketing of portable food warming fuels and creative ambience solutions for the hospitality and consumer markets (Sterno Products); and

• The design, manufacture and marketing of airguns, archery products, optics and related accessories (Velocity Outdoor).

About Tilray
Tilray is a global pioneer in the research, cultivation, production and distribution of cannabis and cannabinoids currently serving tens of thousands of patients and consumers in twelve countries spanning five continents.

About Manitoba Harvest 
Headquartered in Winnipeg, Manitoba, and founded in 1998, Manitoba Harvest is a pioneer and global leader in branded, hemp-based foods. The company is the world’s largest vertically-integrated hemp food manufacturer and is strategically located near its supply base in Canada. Manitoba Harvest’s 100% all-natural product lineup includes hemp hearts, hemp protein powder and hemp snacks and are currently carried in about 16,000 retail locations across the U.S. and Canada.