RIV Capital announces initial closing of Etain acquisition

Rhea-AI Summary

RIV Capital has completed the Initial Closing of its acquisition of Etain, LLC and Etain IP LLC for approximately US$198 million in cash and common shares. The deal includes a potential additional payment of US$49 million pending regulatory approvals from the New York Cannabis Control Board. Concurrently, The Hawthorne Collective invested US$25 million in RIV Capital via a convertible note. BrandCo HoldCo acquired 21,092,335 common shares at C$1.65 each, representing 12.9% of RIV's outstanding shares. The completion of the final closing is subject to further conditions.

Positive

• Acquisition of Etain enhances RIV Capital's market presence in New York's legal cannabis sector.
• Potential for additional US$49 million to strengthen RIV's financial position post-regulatory approval.
• Investment from The Hawthorne Collective boosts RIV Capital's operational funding.

Negative

• Acquisition completion depends on regulatory approvals, introducing uncertainty.
• Investment from HoldCo may lead to share dilution for existing shareholders.

TORONTO, April 22, 2022 /PRNewswire/ - RIV Capital Inc. (CSE: RIV) (OTC: CNPOF) ("RIV Capital" or the "Company") today announced completion of the initial closing (the "Initial Closing") of its previously disclosed transaction involving Etain, LLC and Etain IP LLC, owners and operators of legally licensed cannabis cultivation and retail dispensaries in the state of New York (the "Etain Acquisition"). Pursuant to the Initial Closing, RIV Capital is acquiring the non-regulated portion of the Etain companies for approximately US$198 million through a combination of cash and newly issued Class A common shares of RIV Capital (the "Common Shares"). An additional amount of approximately US$49 million through a combination of cash and Common Shares will be paid subject to, among other things, receipt of all required regulatory approvals, including from the New York Cannabis Control Board and the New York State Office of Cannabis Management.

Concurrent with the Initial Closing, The Hawthorne Collective, Inc. ("The Hawthorne Collective"), a wholly-owned subsidiary of The Scotts Miracle-Gro Company, completed its additional US$25 million investment in RIV Capital, evidenced by a newly issued convertible note with a principal amount of approximately C$31.3 million (being the Canadian dollar equivalent of US$25 million based on the daily average exchange rate posted by the Bank of Canada on the day prior to the date of the related note purchase agreement) and a conversion price of C$1.65 per Common Share. As previously announced, the additional investment was undertaken pursuant to rights existing under The Hawthorne Collective's previous convertible note investment in RIV Capital.

Early Warning Reporting Disclosure

BrandCo HoldCo, LLC ("HoldCo") announces, pursuant to applicable requirements of Canadian securities laws that it has acquired (the "Acquisition") 21,092,335 Common Shares pursuant to the Initial Closing at a price of C$1.65 per Common Share and approximately C$34.8 million in the aggregate, representing approximately 12.9% of the issued and outstanding Common Shares. Prior to the Acquisition, HoldCo did not beneficially own or control any Common Shares. Upon consummation of the final closing of the Etain Acquisition, it is expected that HoldCo will, subject to customary purchase price adjustments, acquire an additional 5,273,084 Common Shares at a value of C$1.65 per Common Share.

HoldCo completed the Acquisition for investment purposes. Subject to applicable laws and the terms of the Etain Investor Rights Agreement (as defined below), HoldCo may acquire additional securities of RIV Capital or may dispose of any or all of its holdings of Common Shares, from time to time through, among other things, transactions on the open market or in private transactions or otherwise, on such terms and at such times as HoldCo may deem advisable depending upon an ongoing evaluation of the Common Shares, the Company, prevailing market conditions, the availability of Common Shares at prices that would make the purchase or sale of Common Shares desirable, other investment opportunities, liquidity requirements of HoldCo, respectively, and/or other considerations and in such manner as it deems appropriate, subject to applicable laws,

In connection with the Initial Closing, RIV Capital, HoldCo and the former beneficial owners of Etain entered into an investor rights agreement (the "Etain Investor Rights Agreement") providing HoldCo and such former beneficial owners with, among other things, registration, information and certain nomination rights.

A copy of the early warning report filed by HoldCo in connection with the above will be filed on SEDAR and made available under RIV Capital's profile on SEDAR at www.sedar.com.

HoldCo is located at 172 Prospect Hill Road, Brewster, New York, 10509. For further information, please contact Hillary Peckham at 914-482-2481.

About RIV Capital

RIV Capital is an operating and brand platform that aims to acquire, invest in and develop U.S. cannabis companies to build the cannabis industry of tomorrow, today. By bringing together people, capital and ideas, we aim to provide shareholders with exposure to exceptional cannabis companies in strategically attractive states poised for significant growth. Backed by our in-house expertise and cannabis domain knowledge, we aim to develop operators and brands who can build market share while we expand the geographic and strategic scope of our multistate platform. RIV Capital also has a strategic relationship with The Hawthorne Collective, a wholly owned subsidiary of The Scotts Miracle-Gro Company, pursuant to which RIV Capital is The Hawthorne Collective's preferred vehicle for investments not under the purview of other Scotts Miracle-Gro subsidiaries.

Forward-Looking Statements

This news release contains statements which constitute "forward-looking information" within the meaning of applicable securities laws, including statements regarding the plans, intentions, beliefs, and current expectations of RIV Capital and its portfolio companies with respect to future business activities and operating performance. Forward-looking information is often identified by the words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" or similar expressions and includes information regarding RIV Capital's investment in Etain, including the timing for completion of the final closing of the Etain Acquisition, the receipt of additional financing from The Hawthorne Collective; and expectations for other economic, business, and/or competitive factors.

Investors are cautioned that forward-looking information is not based on historical fact but instead reflects management's expectations, estimates, or projections concerning future results or events based on the opinions, assumptions, and estimates of management considered reasonable at the date the statements are made. Although RIV Capital believes that the expectations reflected in such forward-looking information are reasonable, such information involves risks and uncertainties, and undue reliance should not be placed on such information, as unknown or unpredictable factors could have material adverse effects on future results, performance, or achievements of RIV Capital or its portfolio companies.

Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the timing and likelihood for receipt of all required regulatory approvals, and satisfaction of other conditions to closing, in respect of the Etain Acquisition; RIV Capital's ability to execute its go-forward strategy; stock market volatility; changes in the business activities, focus and plans of RIV Capital and its investees and the timing associated therewith; the timing of any changes to federal laws in the U.S. to allow for the general cultivation, distribution, and possession of cannabis; regulatory and licensing risks; changes in cannabis industry growth and trends; changes in general economic, business and political conditions, including changes in the financial markets; the global regulatory landscape and enforcement related to cannabis, including political risks and risks relating to regulatory change; risks relating to anti-money laundering laws; compliance with extensive government regulation, including RIV Capital's interpretation of such regulation; public opinion and perception of the cannabis industry; divestiture risks; and the risk factors set out in RIV Capital's management's discussion and analysis and annual information form filed with the Canadian securities regulators and available on RIV Capital's profile on SEDAR at www.sedar.com.

RIV Capital intends to invest in and/or acquire companies that are involved in the manufacture, possession, use, sale, and distribution of cannabis in the recreational and medicinal cannabis marketplace in the United States. Local state laws where such operations occur permit such activities however, investors should note that there are significant legal restrictions and regulations that govern the cannabis industry in the United States. Cannabis remains a Schedule I drug under the U.S. Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute or possess cannabis in the United States. Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable U.S. federal money laundering legislation.

While the approach to enforcement of such laws by the federal government in the United States has trended toward non-enforcement against individuals and businesses that comply with recreational and medicinal cannabis programs in states where such programs are legal, strict compliance with state laws with respect to cannabis will neither absolve RIV Capital of liability under U.S. federal law nor will it provide a defense to any federal proceeding which may be brought against RIV Capital. The enforcement of federal laws in the United States is a significant risk to the business of RIV Capital and any proceedings brought against RIV Capital thereunder may adversely affect RIV Capital's operations and financial performance.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated, or expected. Although RIV Capital has attempted to identify important risks, uncertainties, and factors that could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated, or intended. RIV Capital does not intend and does not assume any obligation, to update this forward-looking information except as otherwise required by applicable law.

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SOURCE RIV Capital Inc.

FAQ

What is the Etain Acquisition by RIV Capital?

RIV Capital is acquiring Etain, LLC and Etain IP LLC for approximately US$198 million to enhance its presence in New York's cannabis market.

What are the financial details of the RIV Capital acquisition?

The acquisition involves US$198 million in initial payment and a potential additional US$49 million subject to regulatory approvals.

Who invested in RIV Capital during the acquisition?

The Hawthorne Collective invested US$25 million in RIV Capital as part of the acquisition process.

What is BrandCo HoldCo's role in the RIV Capital acquisition?

BrandCo HoldCo acquired 21,092,335 common shares of RIV Capital at C$1.65 per share, representing 12.9% of outstanding shares.

How does the Etain Acquisition impact RIV Capital's future?

The acquisition is expected to expand RIV Capital's market share in the cannabis sector, pending regulatory approvals.