Leading Global Cannabis Company Aphria Inc. Announces Agreement to Acquire Sweetwater Brewing Company

From SweetWater:

Portfolio of Beer Brands, Including the Flagship 420 Brand, Aligns
with a Cannabis Lifestyle and Provides a Scalable Platform for
Expansion into the U.S. and Canada

Accretive Acquisition Significantly Expands Aphria’s
Addressable Market and Diversifies Product Offerings

Establishes an Infrastructure in the U.S. Enabling Accelerated
Entry into U.S. Cannabis Market, Subject to Federal

Aphria to Host a Conference Call and Webcast

This news release constitutes a “designated news release”
for the purposes of Aphria’s prospectus supplement dated July 29,
2020 to its short form base shelf prospectus dated November 22,

Leamington, Ontario – November 4, 2020 – Aphria Inc.
(“Aphria” or the “Company”) (TSX: APHA and
Nasdaq: APHA), a leading global cannabis company inspiring and
empowering the worldwide community to live their very best life,
today announced it has entered into an agreement of merger and
acquisition (the “Agreement”) to acquire SW Brewing Company,
LLC (“SweetWater Brewing Company” or “SweetWater”).
SweetWater Brewing Company is one of the largest independent craft
brewers in the United States (“U.S.”) based on volume.
Beginning with the flagship 420 beverage offerings, SweetWater has
created an award-winning lineup of year-round, seasonal and
specialty beers, a portfolio of brands closely aligned with a
cannabis lifestyle. The approximately USD $300 million acquisition
has been unanimously approved by Aphria’s Board of Directors and
is expected to close before the end of December 2020. Aphria
expects this acquisition to be immediately accretive to EBITDA and
diluted earnings per share. All dollar amounts in the press release
are expressed in U.S. dollars, unless otherwise noted.

Founded in 1997 by Freddy Bensch, SweetWater has broad consumer
appeal and has established strong distribution across 27 states
plus Washington, D.C. and has ample capacity to support
distribution efforts into new geographies, with limited capital
expenditure. From its state-of-the-art brewery in Atlanta, Georgia,
SweetWater produces a balanced variety of year-round and seasonal
specialty craft brews, with SweetWater beverages available in
approximately 29,000 off-premise retail locations ranging from
independent bottle shops to national chains. SweetWater’s
significant on-premises business allows consumers to enjoy its
varietals in more than 10,000 restaurants and bars.

In addition to its traditional distribution footprint,
SweetWater 420 Extra Pale Ale and IPA are served on all Delta
flights nationwide plus internationally totaling more than 50
countries across six continents which has served to extend
SweetWater’s brand reach on both a national and international
level. The Company also hosts an annual music festival,
“SweetWater 420 Fest,” that has evolved into one of the largest
and most anticipated music festivals in the U.S., increasing brand
awareness nationwide. In 2019, the 420 Strain G13 IPA became the
top new craft brand in the U.S. in the first 12 months after its
launch. In addition to branding, SweetWater’s various 420 strains
of craft brews use terpenes and natural hemp flavors that, when
combined with select hops, emulate the flavors and aromas of
popular cannabis strains, to appeal to a loyal consumer base that
made the 420 Strain G13 IPA their #2 best-selling beer and #1
best-selling new craft beer in the U.S. For the year ended December
31, 2019, SweetWater Brewing Company generated net revenue and
adjusted EBITDA of $66.6 million and $22.1 million, respectively,
and production volume increased 7% year-over-year to nearly 261,000
barrels, twice the growth rate of the craft beer market nationally,
according to the Brewers Association.

“Our strong balance sheet and access to capital have enabled
us to enter the U.S. through this strategic and accretive
acquisition. We will establish and grow our U.S. presence through
SweetWater’s robust, profitable platform of craft brewing
innovation, manufacturing, marketing and distribution expertise. At
the same time, we will build brand awareness for our adult-use
cannabis brands, Broken Coast, Good Supply, Riff and Solei, through
our participation in the growing $29 billion craft brew market in
the U.S. ahead of potential future state or federal cannabis
legalization,” said Irwin D. Simon, Aphria’s Chairman and Chief
Executive Officer. “We look forward to building upon the
strengths of each of our respective and complementary brands,
diversifying our product offering, broadening our consumer reach,
and enhancing loyalty with consumers.”

“We are excited to welcome Freddy and the entire SweetWater
team to the Aphria family,” continued Simon. “As a
purpose-driven company, Aphria takes great pride in leading with
our core values and is committed to changing people’s lives for
the better by investing in our products, our people and our planet
– a sentiment SweetWater completely shares with us.”

Freddy Bensch, SweetWater’s Founder and Chief Executive
Officer, commented, “We are excited by the opportunity to join a
leading global cannabis company and build a successful future based
on the strengths we both bring to this combination. Our 420 brand
offerings and SweetWater 420 Fest complement Aphria’s cannabis
business and create mutual opportunities for accelerated expansion
into other cannabis- and beverage-related products in the U.S. and
Canada. We will leverage our growing beverage offering and build an
even stronger, more diversified company with a continued focus on
authentic and distinctive brands using some of the freshest, most
flavorful ingredients to create innovative and high quality
beverages including beers, seltzers, spirits and non-alcoholic
beverages that our loyal and growing consumer base has come to
expect from SweetWater.”

Strategic and Financial Benefits

In addition to acquiring a strong brand and accretive business,
this strategic acquisition positions Aphria with a platform and
infrastructure within the U.S. to enable it to access the U.S.
market more quickly in the event of federal legalization. The
acquisition will create a larger and more diversified leading
global cannabis company. Aphria believes the combination will
provide several financial and strategic benefits, including the

Creates a Combined Branded Cannabis Lifestyle
Products Company with Diversified Financial Position:

On a combined basis, Aphria and SweetWater will have
approximately CAD $650 million to CAD $675 million of annualized
pro-forma net revenue and approximately CAD $65 million to CAD $70
million of annualized pro-forma adjusted EBITDA. The acquisition is
expected to further diversify Aphria’s current net revenue mix,
with the combined cannabis and distribution business representing
approximately 85 percent of net revenue and the craft brewing and
beverage business representing approximately 15 percent of net
sales, based on the pro forma net revenue. In addition, Aphria
expects the acquisition to be margin accretive with SweetWater
generating adjusted EBITDA margins well in excess of 30

Generates Significant Cross-Selling Opportunities
while Expanding Aphria’s Addressable Market in both the U.S. and

The combination of Aphria’s existing cannabis business with
SweetWater’s craft brewing business is expected to expand
Aphria’s addressable market. According to Brewers Association,
2019 retail dollar sales of craft beer in the U.S. was $29.3
billion. Aphria’s acquisition of SweetWater Brewing Company will
provide a robust, profitable platform for future growth and
development in the U.S. market. Aphria believes the acquisition
will position it to introduce and build brand awareness of, and
equity in, its existing adult-use cannabis brands Broken Coast,
Good Supply, Riff and Solei in the U.S. by leveraging SweetWater
Brewing Company’s manufacturing and distribution infrastructure. 
The explosive growth of SweetWater’s Strain series, launched in
2018, showcases its cultivated reputation for innovation, staying
at the forefront of the industry and current with craft and
consumer trends.  Leveraging SweetWater’s innovation knowledge
and expertise, Aphria plans to introduce its brands via craft beers
and other beverages as well as other non-alcoholic products as it
seeks to take advantage of opportunities for both the adult-use and
health and wellbeing beverage trends. Similarly, Aphria will be
able to enter the Canadian beverage alcohol sector to distribute
and sell SweetWater’s 420 brand and other beverage offerings in
Canada. In addition, SweetWater’s innovation pipeline includes
entry into the rapidly growing hard seltzer category, which is
being fueled by millennials, an important demographic.

Opportunity for Accelerated Entry into the U.S.
Cannabis Market, Subject to Federal Legalization:

Aphria believes the acquisition of SweetWater is the cornerstone
of its longer-term U.S. strategy and an important step towards
achieving its vision to change people’s lives for the better by
inspiring and empowering the worldwide community to live their very
best life.  SweetWater’s existing infrastructure can be leveraged
to accelerate Aphria’s entry into the U.S. ahead of federal
legalization of cannabis. The acquisition also provides the
addition of key partnerships with leading U.S. distributors,
retailers and on-premises customers strengthening Aphria’s
ability to develop new distribution in the U.S. for its

Addition of an Experienced Executive Team:

The acquisition will expand Aphria’s leadership team through
the addition of SweetWater’s talented group of executives who
have substantial operational experience in the craft brewing and
beverage industry and a proven track record of developing, building
and growing strong consumer brands. SweetWater’s management team
will remain in place along with approximately 125 employees. Freddy
Bensch will continue as Chief Executive Officer of the wholly owned
subsidiary, reporting directly to Irwin D. Simon, reflecting the
commitment and belief of both companies in the future success of
the combined company. Freddy Bensch will enter into a consulting
agreement that will continue until the end of calendar 2023,
subject to renewals.

Agreement Details

Under the terms of the Agreement, SweetWater will become a
wholly owned subsidiary of Aphria.   The unitholders of SweetWater
will receive $250 million in cash and approximately $50 million in
Aphria stock at closing and are eligible to receive up to $66
million of additional cash under an earnout through the end of
calendar year 2023.  The initial transaction value represents
approximately 12.5x adjusted EBITDA multiple and it is expected to
close before the end of December 2020.

The Agreement contains customary terms and conditions for a
transaction of this nature, including representations and
warranties of both Aphria and SweetWater, termination rights and
customary closing conditions, including (I) HSR clearance (ii) no
governmental authority shall have enacted any order prohibiting the
completion of the acquisition, (iii) no material adverse effect in
respect of the SweetWater business, and (iv) the accuracy of each
party’s representations and warranties and each party’s
material compliance with its covenants and agreements contained in
the Agreement.  For further information on the terms and conditions
of the acquisition, please refer to the entire Agreement available
on SEDAR at www.sedar.com and
on EDGAR at www.sec.gov.

Aphria expects to finance the cash component of the purchase
price under the Agreement through (I) a committed $100 million term
debt facility at the SweetWater level to be provided by certain of
Aphria’s and SweetWater’s existing lenders, (ii) accessing up
to $100 million from its existing $100 million At-The-Market
(“ATMâ€) equity program, and (iii) available cash on hand. 
Aphria has sufficient cash on hand to fund the acquisition.

About SweetWater Brewing Company

SweetWater Brewing Company has been in operation since 1997. 
The principal executive offices of SweetWater Brewing Company are
located at 195 Ottley Drive, Atlanta, Georgia 30324.  SweetWater
Brewing Company’s website is www.sweetwaterbrew.com.

Freddy Bensch, Founder of SweetWater, and his team have
established the brewery into one of the largest independent craft
brewers in the United States.  SweetWater manufactures and
distributes bottled, canned and draft premium craft beers under the
SweetWater brand.

SweetWater Brewing Company has a state-of-the-art brewery and
integrated restaurant and live music venue at its principal offices
in Atlanta, Georgia.  The 158,000 square foot building is leased,
and the lease expires in 2040.  SweetWater obtains the ingredients
used in its products and the packaging for its products from a
variety of different sources and has not historically had any
difficulty in securing an adequate supply of ingredients or
packaging for its products.  The facility bottling and canning
lines are capable of packaging 23.5 million gallons of bottles
annually.  The facility also has kegging capacity of 1.5 million
kegs annually.

SweetWater Brewing Company is not subject to any material legal
or regulatory proceedings that could adversely affect the operation
of the business.



Jefferies LLC is serving as financial advisor and DLA Piper LLP
(U.S.) and Fasken Martineau Dumoulin LLP (Canada) are acting as
legal counsel to Aphria. Arlington Capital Advisors is serving as
financial advisor and Winston & Strawn LLP is acting as legal
counsel to SweetWater.

Conference Call & Webcast Presentation

Aphria executives will host a conference call and webcast with a
supplemental presentation to discuss the SweetWater Brewing Company
acquisition today, November 4, 2020 at 4:20 p.m. Eastern Time.

To listen to the live call, dial (888) 231-8191 from Canada and
the U.S. or (647) 427-7450 from international locations and use the
passcode 5094492. A telephone replay will be available
approximately two hours after the call concludes through December
2, 2020. To access the recording dial (855) 859-2056 and use the
passcode 5094492.

There will also be a simultaneous, live webcast and supplemental
presentation available on the Investors section of Aphria’s
website at aphriainc.com. The
webcast will be archived for 30 days.

We Have A Good Thing Growing

About Aphria Inc.

Aphria Inc. is a leading global cannabis company inspiring and
empowering the worldwide community to live their very best life.
Headquartered in Leamington, Ontario – the greenhouse capital of
Canada – Aphria Inc. has been setting the standard for the
low-cost production of high-quality cannabis at scale, grown in the
most natural conditions possible. Focusing on untapped
opportunities and backed by the latest technologies, Aphria Inc. is
committed to bringing breakthrough innovation to the global
cannabis market. The Company’s portfolio of brands is grounded in
expertly researched consumer insights designed to meet the needs of
every consumer segment. Rooted in our founders’ multi-generational
expertise in commercial agriculture, Aphria Inc. drives sustainable
long-term shareholder value through a diversified approach to
innovation, strategic partnerships and global expansion.

For more information, visit: aphriainc.com

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